US regulators fined Bank of America $1.21 billion for failing to detect and report suspicious financial activity involving more than $5 billion in transactions, Reuters reported.

The US Treasury Department said more than $1 billion of the unreported activity involved national security concerns and other high-priority risks. The penalty ranks among the largest in the department’s history and is expected to affect the bank’s third-quarter earnings.

Regulators said the bank relied too heavily on information from law enforcement agencies and other financial institutions instead of identifying suspicious transactions through its own systems. They also found that the bank prioritised revenue while developing its compliance programmes. Its transaction monitoring systems failed to flag suspicious activity promptly, delaying reports to the government.

Under a consent order, Bank of America must appoint an independent third party to review past transactions, identify previously undetected suspicious activity and report it to the Financial Crimes Enforcement Network (FinCEN).

The Office of the Comptroller of the Currency (OCC) imposed a $750 million civil penalty, the largest in its history. The action followed shortcomings identified in a 2024 cease-and-desist order.

Bank of America said its third-quarter results, due on Wednesday, would include a $1.2 billion non-deductible charge. The charge is expected to reduce quarterly net income by around 17 cents per share, according to the bank’s statement cited by Reuters.

The bank said it had invested billions of dollars in technology and assigned thousands of employees to combat financial crime. A spokesperson said the company remained committed to completing the work regulators require.

The announcement also affected investor sentiment. Bank of America shares fell 2.7% in after-hours trading on Tuesday after closing the regular session 1.1% lower.

UBS analyst Erika Najarian said the penalty could raise concerns about the bank’s expenses and its ability to sustain its quarterly share buyback programme of around $6 billion, Reuters reported.

Separately, the bank paid an $11.6 million penalty to the Treasury Department’s Office of Foreign Assets Control for more than 400 apparent sanctions violations. The Treasury said the bank had processed millions of dollars in payments that breached sanctions targeting countries including Russia and Iran.

The action came days after American Express faced a $350 million penalty over similar anti-money laundering failures.