Bank of America reveals investigation into Zelle platform, hints at potential legal action
Bank of America Faces Regulatory Scrutiny Over AML and Sanctions Compliance
Bank of America is currently under investigation by several federal regulators, including the Office of the Comptroller of the Currency (OCC) and the Consumer Financial Protection Bureau (CFPB), regarding aspects of its Anti-Money Laundering (AML) and sanctions compliance programs. This scrutiny follows similar investigations of Wells Fargo and JPMorgan Chase earlier this year.
Analyst Scott Siefers suggests that Bank of America's experience could mirror that of Wells Fargo, with a resolution coming in short order and potentially without any financial penalties. However, the CFPB has expressed a desire to resolve the inquiry or file an enforcement action, and Bank of America is considering potential next steps, including litigation.
The OCC hit Wells Fargo with an enforcement action in September over AML and sanctions issues, resulting in the bank being tasked with improving internal controls, policies, procedures, reporting, and management and board accountability around AML and sanctions practices. The formal agreement with Wells Fargo did not include a fine.
Bank of America is implementing enhancements to its AML/BSA and sanctions compliance programs as it cooperates with regulators. In its second-quarter filing, the bank listed 'the adequacy of the Corporation's anti-money laundering and economic sanctions program' as a risk and uncertainty.
The CFPB has been inquiring into Bank of America's processing of electronic payments through Zelle, operated by Early Warning Services. The company is based in Scottsdale, Arizona, and is owned by JPMorgan, Wells Fargo, Bank of America, PNC, Capital One, Truist, and U.S. Bank. Bank of America has disclosed a response to the CFPB's inquiry, but the bureau did not immediately respond to a request for comment.
Analyst Siefers also believes that the increased regulatory focus on AML and sanctions issues is part of a broader trend, rather than indicative of company-specific deficiencies. He suggests that investors may conclude that the regulatory inquiries into banks' AML and sanctions programs are part of a broader regulatory focus, raising the bar on risks and controls.
Meanwhile, JPMorgan is weighing litigation in response to the CFPB's inquiry, and CEO Jamie Dimon has expressed concerns about a system where banks are responsible for every payment knowingly sent. Democratic lawmakers have also introduced legislation aiming to expand consumer protection under the Electronic Fund Transfer Act.
Analyst Siefers also mentions the possibility of banks purchasing licensing rights as a potential response to regulatory scrutiny. The resolution of the discussions with regulators may result in one or more public orders by the regulators.
As the investigations continue, Bank of America and other financial institutions will need to navigate the complex regulatory landscape and ensure compliance with AML and sanctions regulations to avoid potential penalties and maintain the trust of their customers and investors.
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