BofA's mega-fine blunted by Team Trump history
RPT-BREAKINGVIEWS-BofA's mega-fine blunted by Team Trump history The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Stephen Gandel
NEW YORK, Oct 14 (Reuters Breakingviews) - Aesop's "Boy Who Cried Wolf" will be a treasured tale for Bank of America BAC.N CEO Brian Moynihan. The mega-lender he runs just copped to violating the Bank Secrecy Act with a deficient anti-money-laundering program, transgressions that include a $1.2 billion fine. Compliance matters of this magnitude tend to unnerve boards and shareholders, but the Trump administration's past pronouncements on financial wrongdoing dilute the moral of this particular story.
The US Treasury Department and Office of the Comptroller of the Currency unveiled enforcement action on Tuesday, accusing BofA of failing to report more than $5 billion of suspicious transactions in a timely manner. The agencies levied one of their biggest-ever penalties because, they said, Moynihan and his team put revenue ahead of addressing concerns raised by regulators before. BofA said it is "far along with and committed to completing" the related issues and already absorbed many of the costs, including hundreds of millions of dollars during the third quarter.
Moynihan has some damage control to do, but he may be in relatively tepid water compared to erstwhile counterparts. Citigroup's C.N Michael Corbat, Wells Fargo's John Stumpf WFC.N and TD Bank's Bharat Masrani TD.TO all left their respective CEO roles after running into similarly significant regulatory problems. President Donald Trump's vexing track record, however, probably gives Moynihan extra wiggle room.
It's easy to question the motivations here. For one thing, Trump pardoned Binance founder Changpeng Zhao, who had pleaded guilty to anti-money-laundering violations and stepped down from the cryptocurrency exchange as part of a $4.3 billion settlement. Administration officials also have been echoing industry complaints that suspicious-activity reporting rules have become overly burdensome. Dubious probes like the one into former Federal Reserve Chair Jerome Powell have more than a whiff of political bullying. Moreover, just days into his second term, the president publicly rebuked Moynihan at the World Economic Forum in Davos for allegedly discriminating against conservative customers.
Moynihan is under some justified pressure. BofA's share price gains have broadly under-performed the industry in recent years, prompting investors to push him to boost returns on tangible common equity into the high teens, even as some rivals already exceed 20%. The bank recently tried to reassure staff about deal-maker defections, Reuters reported this week. Even excluding the latest regulatory penalty, its third-quarter earnings would have declined, making it an outlier among large lenders.
Although compliance shortcomings add to the CEO's challenges, the true extent of the problem is hard to discern because of who's shouting about them. As a result, Moynihan has scope to keep the real wolves at bay.
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CONTEXT NEWS
Bank of America on October 13 agreed to pay a $1.2 billion fine to settle accusations in a civil case brought by the financial crimes unit of the Treasury Department and Office of the Comptroller of the Currency that it failed to address previously flagged lapses in its anti-money-laundering controls.
The US regulators said the bank failed to report in a timely way more than $5 billion of suspicious transactions to Treasury's Financial Crimes Enforcement Network. As part of the settlement, BofA admits that it willfully violated the Bank Secrecy Act and failed to implement and maintain an anti-money-laundering program that met minimum regulatory requirements, Treasury said in a statement.
BofA is required to work with a third party to identify and report suspicious transactions that were undetected and undergo an independent review of its suspicious activity monitoring and other programs, according to the consent order.
(Editing by Jeffrey Goldfarb; Production by Pranav Kiran)
((For previous columns by the author, Reuters customers can click on GANDEL/ stephen.gandel@thomsonreuters.com))