SKN | Bank of America Faces Securities Litigation as Record AML Penalties Expose Compliance Failures

Key Takeaways:

• Bank of America faced more than $1.21 billion in coordinated regulatory penalties following serious anti-money laundering and sanctions compliance failures.
• The bank admitted willful violations of the Bank Secrecy Act and must complete an independent review and a retrospective examination of previously undetected suspicious transactions.
• A securities class action filed against the bank and two senior executives adds potential legal and governance exposure, placing greater importance on the execution of its remediation programme.

Bank of America (NYSE: BAC) is confronting a significant test of regulatory credibility after U.S. authorities imposed one of the largest enforcement packages in Treasury history. The October action has now been followed by investor litigation alleging that the bank and certain executives made misleading statements or failed to disclose material information about its compliance controls and regulatory exposure. For the bank, the issue extends beyond the immediate financial penalty: restoring confidence in its internal oversight systems is now central to its operating and reputational outlook.

Regulatory Penalties Reveal Persistent Weaknesses in Bank Controls

On October 13, 2026, the U.S. Department of the Treasury announced more than $1.21 billion in coordinated penalties against Bank of America. The enforcement package included a $1.2 billion penalty from the Financial Crimes Enforcement Network (FinCEN), a $750 million civil penalty assessed by the Office of the Comptroller of the Currency (OCC), and an $11.6 million settlement with the Office of Foreign Assets Control (OFAC). Importantly, the OCC penalty is credited against the FinCEN penalty; the amounts should not be added together as separate charges to produce a $1.96 billion total.

The central findings concerned deficiencies in transaction monitoring, customer due diligence and suspicious activity reporting. FinCEN stated that the bank had failed to report more than $5 billion in suspicious transactions on a timely basis, including activity involving priority national security and illicit-finance risks. Bank of America also admitted that it willfully violated the Bank Secrecy Act, including requirements to maintain an adequate anti-money laundering programme and conduct due diligence on foreign correspondent accounts.

The regulatory response requires the bank to work with an independent third party to review historical transactions and identify activity that should have been reported. It must also undergo independent assessments of its suspicious activity monitoring, customer due diligence, correspondent banking controls and relevant data governance framework. These requirements make the quality and speed of remediation a continuing supervisory issue rather than a matter resolved by payment of the penalties.

The Financial Charge and Investor Lawsuit Extend the Exposure

Bank of America recorded a $1.2 billion non-tax-deductible regulatory settlement charge in its third-quarter 2026 results. The bank disclosed that the charge reduced diluted earnings per share by approximately $0.17. Management said it had invested billions of dollars in financial-crime technology and assigned thousands of employees to compliance work, adding that the remaining remediation effort was already reflected in its expense base.

The legal exposure widened on October 16, when New England Teamsters Pension Fund filed a securities class action in the U.S. District Court for the Southern District of New York against Bank of America, Chief Executive Brian Moynihan and Chief Financial Officer Alastair Borthwick. The complaint alleges violations of federal securities laws concerning statements and disclosures about the bank’s compliance controls. The proposed class period runs from August 1, 2025, through October 13, 2026. These remain allegations, not findings of liability.

The litigation introduces another layer of uncertainty around disclosure practices, management oversight and the potential cost of resolving claims. Investors who acquired the bank’s securities during the proposed class period and incurred losses may wish to review the case with independent securities counsel. The December 15, 2026 lead-plaintiff deadline concerns investors seeking appointment to represent the class; it should not be confused with a final determination of eligibility or liability.

Remediation Will Determine the Bank’s Longer-Term Risk Profile

For Bank of America, the next phase will be measured by demonstrable improvements in transaction surveillance, escalation procedures, sanctions screening and independent audit effectiveness. Further regulatory findings, additional remediation costs or developments in the securities litigation could affect the bank’s earnings outlook and governance assessment. The enforcement action does not, by itself, establish a capital or liquidity shortfall; the more immediate question is whether the bank can restore confidence in controls across a complex global transaction network.

For sophisticated investors, the decisive indicators will be the bank’s progress against regulatory requirements, the durability of its compliance investment and the extent to which legal and supervisory issues remain contained. Bank of America’s ability to demonstrate lasting operational improvements will matter more than the one-time settlement charge. For a confidential discussion regarding institutional banking exposure and cross-border financial structures, contact our senior advisory team.