Banks scrutinized political viewpoints while missing billions in suspicious transactions

The US Treasury’s $1.2 billion penalty against Bank of America (BoA) has exposed a troubling contradiction in the nation’s financial oversight system: major banks have faced criticism for restricting lawful customers over political or religious affiliations while failing for years to identify and report enormous volumes of potentially illicit financial activity.

The penalty, among the largest in Treasury’s history and the largest ever imposed by the Office of the Comptroller of the Currency (OCC), underscores the consequences of inadequate anti-money laundering controls at one of America’s largest financial institutions.

According to Treasury findings, Bank of America failed to meet fundamental obligations under the Bank Secrecy Act between 2018 and 2025. Its anti-money laundering program was deficient, and the bank significantly delayed filing Suspicious Activity Reports (SARs). Regulators identified shortcomings in the allocation of compliance resources and a pattern in which business considerations took precedence over the timely investigation of suspicious transactions.

As a result, more than $5 billion in transactions were not reported promptly. More than $1 billion involved elevated national-security risks, including activity consistent with Chinese money-laundering networks, fraud schemes and trade-based financial movements associated with the southern US border. Treasury highlighted suspicious patterns involving large transfers to China, unusual credit-card activity and potentially illicit trade transactions.

How Chinese money-laundering networks operate

The case comes amid a broader US effort to disrupt Chinese money-laundering networks that help Mexican drug cartels move proceeds from narcotics trafficking, including fentanyl distribution.

These networks exploit differences between China’s demand for access to foreign currency and the cartels’ need to convert US drug proceeds into usable funds. Chinese capital controls generally limit individuals to purchasing $50,000 in foreign currency annually, creating incentives for some customers to seek alternative channels for transferring money abroad.

In a typical arrangement, a broker linked to a criminal network collects drug-sale proceeds in dollars inside the United States. Using platforms such as WeChat, the broker matches those dollars with Chinese customers seeking access to US currency. The customers transfer equivalent amounts in yuan, plus a fee, into accounts controlled by the network in China. In return, they or their associates gain access to the corresponding dollars already held in the United States.

The arrangement allows both sides to bypass conventional cross-border transfers. Funds retained in China can also finance purchases of goods, including chemicals used in illicit fentanyl production, or Chinese-manufactured products shipped to Mexico and sold to generate additional revenue for criminal organizations. Former Justice Department official Craig Timm has described these networks as a major method of laundering illicit proceeds globally.

Treasury Secretary Scott Bessent emphasized the broader implications of banking failures, warning that when a financial institution of this size neglects its anti-money laundering and sanctions obligations, the resulting risks extend across the entire US financial system.

Bank of America is not an isolated case

The Bank of America penalty follows another major enforcement action against TD Bank. In 2024, TD Bank’s US operations agreed to more than $3 billion in penalties after pleading guilty to Bank Secrecy Act violations and conspiracy to commit money laundering.

US authorities found that criminal networks had moved hundreds of millions of dollars through TD Bank. One Chinese money-laundering organization alone reportedly handled approximately $653 million in narcotics proceeds and other illicit funds. Investigators also documented serious compliance deficiencies, including instances in which employees accepted small gifts in exchange for overlooking suspicious deposits.

These cases demonstrate how weak compliance systems can provide criminal enterprises with access to the legitimate financial infrastructure they need to move money, conceal its origins and sustain their operations. Delayed suspicious-activity reports also limit the government’s ability to investigate networks, freeze assets, enforce sanctions and pressure financial intermediaries to cut off criminal organizations.

Political scrutiny and compliance priorities

A separate OCC review has raised questions about whether major banks have applied their compliance and risk-management standards consistently. The review reportedly found that Bank of America, TD Bank and seven other large US institutions restricted or terminated relationships with conservative organizations, religious groups and certain lawful businesses because of their political or religious affiliations.

In one example involving TD Bank, a nonprofit’s application for a pandemic-relief loan encountered objections after the Southern Poverty Law Center designated the organization a hate group over its position on immigration. The nonprofit subsequently withdrew its application.

Bank of America also ended relationships with customers in the private-prison and detention-center industries during the Biden administration, citing reputational concerns associated with changing policy attitudes. The bank later sought to reengage with a similar customer after the administration changed. The OCC characterized this shift as political “whipsaw,” highlighting the risks of financial decisions that appear overly sensitive to changing political priorities.

Another controversy concerns the FBI’s access to customer information following the January 6, 2021, Capitol attack. An FBI whistleblower stated that Bank of America supplied the bureau with a list of customers who had used its cards in the Washington DC, area around that date. The disclosure has fueled concerns about the boundaries between legitimate financial surveillance and the privacy rights of ordinary Americans.

According to reporting on a House Judiciary Committee investigation, the bank maintained that its actions were consistent with its Bank Secrecy Act obligations, despite concerns about the absence of legal process. The episode raises broader questions about how financial institutions interpret their reporting responsibilities and protect customers’ information.

A question of accountability

Taken together, these cases raise a fundamental question about the priorities of the American financial system. Banks have legal obligations to identify suspicious transactions, report potential criminal activity and comply with sanctions. They also have responsibilities to treat customers fairly and avoid arbitrary decisions based on political or religious viewpoints.

The evidence does not establish that every decision to terminate a customer relationship was improper, nor does it demonstrate that every delayed report involved criminal proceeds. Nevertheless, the contrast between reported compliance failures and allegations of viewpoint-based financial restrictions deserves serious scrutiny.

When banks devote attention to reputational concerns involving lawful customers while failing to detect or report transactions associated with sophisticated criminal networks, the consequences extend beyond individual institutions. Such failures can undermine law enforcement, facilitate drug trafficking and weaken confidence in financial regulation.

The central challenge for regulators is to ensure that banks apply risk-based standards consistently, investigate credible warning signs promptly and protect lawful customers from unjustified discrimination. Financial institutions should not be permitted to neglect their core anti-money laundering responsibilities while invoking compliance or reputational risk to justify controversial customer restrictions.

Effective oversight must hold banks accountable on both fronts. Protecting the financial system requires neither politically selective scrutiny nor passive acceptance of suspicious transactions, but consistent enforcement of the law based on evidence, risk and clearly defined legal obligations.

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