What does the historic Bank of America fine mean for US-China capital streams?

As the US Treasury imposed historic fines on Bank of America over compliance failures involving Chinese money-laundering networks, analysts see the action as a signal that could prompt Western banks to tighten scrutiny of Chinese clients and cross-border transactions.

The penalties, announced on Tuesday and totalling more than US$1.21 billion, included what the US Treasury described as its third-largest penalty on record and the largest in the history of the Office of the Comptroller of the Currency.

Bank of America had failed to report more than US$5 billion in suspicious transactions in a timely manner, including more than US$1 billion involving national security-related and other priority risks such as “suspicious transactions indicative of Chinese money-laundering networks, fraud and potential trade-based money-laundering with a substantial nexus to the southwest border”, according to a Treasury statement.

The bank had also processed millions of dollars in payments “in apparent violation of sanctions programmes”, including those targeting Russia, Iran and narcotics and global terrorism networks, the Treasury added.