Bank of America was hit with more than $1.2 billion in combined federal penalties Tuesday after regulators found the bank's anti-money-laundering systems failed to flag trillions of dollars in suspicious transactions, including flows tied to Chinese money-laundering networks and illicit finance along the U.S.-Mexico border.

The Treasury Department's Financial Crimes Enforcement Network, known as FinCEN, assessed a $1.2 billion penalty against the bank — the third-largest in the unit's history — tied to what officials described as a willful failure to mitigate and report "priority" national security risks. The bank admitted it violated the Bank Secrecy Act and failed to maintain a compliant anti-money-laundering program, according to a Treasury Department press release.

Multiple regulators, one failing system

The Office of the Comptroller of the Currency separately imposed its own $750 million civil money penalty — the largest in that agency's history — saying the bank's compliance program had been "deficient and ineffective" for years and that its transaction-monitoring system failed to properly screen enormous volumes of activity flowing through its accounts. A smaller, $11.6 million settlement with Treasury's Office of Foreign Assets Control resolved separate allegations that the bank violated U.S. sanctions programs tied to Iran, Russia, narcotics trafficking and terrorism financing.

THE BANK ADMITTED IT WILLFULLY VIOLATED THE BANK SECRECY ACT

Unlike recent cases against TD Bank and the crypto exchange Binance, Tuesday's action against Bank of America did not come with an accompanying Justice Department criminal case, according to CNBC's reporting. The settlement also lands just days after federal regulators fined American Express $350 million over similar failures to detect and report suspected money laundering — part of a broader regulatory push this fall to crack down on banks' compliance infrastructure.

Bank of America, the nation's second-largest bank by assets, said in a statement that it has since overhauled its compliance program and invested heavily in new monitoring technology, though it did not dispute the findings underlying the penalties.

A pattern across the industry

Regulators described Bank of America's lapses as systemic rather than isolated, pointing to years of gaps in the bank's "know your customer" screening and its handling of suspicious-activity reporting obligations that are supposed to flag potential laundering to law enforcement in near-real time. Officials said the bank's monitoring software was configured in ways that allowed enormous volumes of transactions tied to flagged jurisdictions and networks to pass through with minimal scrutiny, a failure regulators called particularly serious given the bank's size and its role as a gateway for international payments.

The action fits into a broader enforcement wave against major financial institutions' anti-money-laundering programs. Treasury has leaned harder on banks in recent years to police flows tied to fentanyl precursor chemicals, human smuggling networks and sanctions evasion by Russian-linked entities, and officials have signaled that Tuesday's penalty is meant to send a message to the rest of the industry about the cost of letting compliance infrastructure lag behind the scale of a bank's operations.

The penalty, while historic in size for a single enforcement action, is a fraction of the tens of billions of dollars Bank of America typically earns in annual profit. The more lasting question is whether the reputational hit and mandated oversight slow the bank's ability to pursue new business lines while regulators monitor its remediation efforts.

What's next

The OCC said it will require Bank of America to submit a detailed remediation plan and may install an independent compliance monitor to verify the bank's fixes hold up. Analysts expect the headline fine to be a one-time charge against quarterly earnings rather than a lasting drag on the bank's business, though the size of the combined penalty — among the largest ever levied against a U.S. bank for anti-money-laundering failures — is likely to intensify scrutiny of compliance spending across the industry.