Bank of America is in discussions with several federal regulators over certain aspects of its efforts to combat money laundering and comply with economic sanctions, the Charlotte, North Carolina-based company disclosed late Tuesday. The bank said it may enter into one or more public enforcement actions to resolve the issues.
BofA's communications with regulators have touched on issues such as transaction monitoring, training, governance and customer due diligence, the $3.3 trillion-asset bank said in a securities filing.
The bank also said that it has been implementing enhancements to its anti-money-laundering and sanctions compliance programs, and will continue to do so.
Based on the company's discussions with regulators, BofA does not expect the issues that have been raised to have a "material adverse financial impact," the disclosure stated.
Still, the filing raises the issue of how much the AML scrutiny will add to BofA's expenses, according to Vivek Juneja, an analyst at JPMorgan Securities.
The additional spending that BofA will need to undertake in the fourth quarter in connection with the AML matter has been accounted for in the company's guidance but not disclosed, Juneja wrote in a research note Wednesday.
BofA's disclosure comes roughly six weeks after another megabank, Wells Fargo, entered into a public enforcement action with the Office of the Comptroller of the Currency in connection with AML and sanctions compliance.
The OCC's action against Wells Fargo did not include the announcement of a monetary penalty, but it did require the San Francisco-based bank to submit a plan to assess any money laundering and sanctions risks tied to new products and services.
Wells Fargo was also barred from expanding into products or markets with higher risks of violations — unless it gets an explicit non-objection from its regulators.
After the Wells Fargo enforcement action became public in September, lawyers, analysts and consultants said they were expecting more banks to be penalized in connection with anti-money-laundering compliance.
"There is an uneasiness," Ed MIlls, a policy analyst at Raymond James, told American Banker last month. "There is always an expectation that, when you see a regulatory action with one large bank, that usually forces an examination of other similar-sized institutions."
If Bank of America eventually faces growth restrictions as a result of AML scrutiny, as Wells Fargo did last month, that would temper medium-term growth in the company's revenue, Juneja wrote.
"BofA has been expanding in several of its businesses in the U.S. and internationally including consumer banking, payments, and trading," Juneja wrote. "Until regulators file formal actions, this issue will remain an overhang and likely to add a little pressure to the stock, in addition to the issue of potential further stock sales by Warren Buffett."
Buffett, who invests through his holding company Berkshire Hathaway, has reduced his position in Bank of America in recent months.
Separately, BofA also disclosed Tuesday that it has been responding to a Consumer Financial Protection Bureau inquiry regarding the bank's processing of electronic payments through the person-to-person Zelle network.
BofA said that the CFPB's staff "has initiated discussions" with the bank "to pursue a resolution of the inquiry or file an enforcement action." The bank added that it "is evaluating next steps, including litigation."
The Wall Street Journal reported in August that the CFPB was investigating BofA, Wells Fargo and JPMorgan Chase over their handling of customer funds on Zelle.
JPMorgan disclosed over the summer that it was responding to a CFPB inquiry regarding Zelle transfers. It, too, said that it was "evaluating next steps, including litigation."
Wells Fargo, meanwhile, has disclosed that "government authorities" have been looking at "the handling of customer disputes related to fund transfers made through the Zelle network."
"This seems to be an industry-wide issue with the crux of the issue being whether banks are responsible for fraudulent transactions," Juneja wrote. He added that the industry is "pushing back heavily."
Sen. Richard Blumenthal, D-Conn., has been arguing that big banks are not doing enough to protect their customers from fraudsters who exploit Zelle.
Under the Electronic Fund Transfer Act, banks have not been required to reimburse customers who authorize payments to scammers.
Blumenthal and Sen. Elizabeth Warren, D-Mass, recently introduced legislation to expand the number of situations where consumers are protected from fraudulent or scam activity. Rep. Maxine Waters, D-Calif., is sponsoring companion legislation in the House.
