The Government Fined A Bank $1.2 Billion For Not on Fraud. Ask How The Government Is Doing On That.

Bank of America was hit with a $1.21 billion penalty Tuesday for anti-money laundering failures.

The Treasury Department found the bank failed to report more than five billion dollars of suspicious activity. The Office of the Comptroller of the Currency imposed a record $750 million penalty of its own.

The announcement landed hours before the bank reported third quarter earnings. The charge will take roughly seventeen cents a share off the results.

Good. Genuinely. A bank that size has an obligation to know where five billion dollars came from, and failing at it is not a paperwork error. It is the entire reason the Bank Secrecy Act exists.

Now hold that thought and look at the last six weeks.

The federal government's position is that a financial institution must flag suspicious transactions, verify identities, and report anomalies, and that failing to do so warrants a billion dollar penalty and a record fine.

Here is how the same federal government has been handling its own money.

In September, the Justice Department charged twelve people in San Diego with running daycares that billed taxpayers more than ten million dollars for children who were never there. One provider left the country for a month and the direct deposits kept arriving on schedule.

In Arizona, a scheme billed Medicaid more than sixty million dollars for addiction treatment that never happened, including claims submitted for patients who were deceased. That case is one piece of a scandal that has cost that state more than two billion dollars.

In September, CMS announced it was removing roughly 750,000 people from Affordable Care Act coverage over enrollments it could not verify. Brokers were being paid per signup while eligibility standards were loosened and nobody audited the result.

Treasury announced last week that it has blocked $175 million in payments to dead Americans this fiscal year, after screening 1.1 billion transactions. Before the fix, the Office of Management and Budget found the government sent $1.3 billion to deceased recipients in a single year, because the agency with the death records and the agency with the checkbook needed congressional permission to talk to each other.

And this month, a Reuters review found more than 30,000 self-declared noncitizens added to voter rolls across eleven states since 2000, traced largely to DMV software errors and clerical mistakes. People stated on a government form that they were not citizens and got registered anyway.

So let us compare standards.

Bank of America: fined $1.21 billion for failing to flag suspicious activity.

The federal government: cannot reliably flag a claim submitted on behalf of a dead patient, a daycare with no children in it, or an applicant who wrote down that he is not a citizen.

The Government Accountability Office estimates improper federal payments run as high as five hundred billion dollars a year. That figure covers overpayments, underpayments and documentation failures across every program, not fraud alone, and nobody should pretend otherwise.

But run the comparison anyway.

The regulator is demanding a standard of vigilance it has never once applied to itself, and it is charging a billion dollars for the gap.

To be clear about where we land.

We are not defending Bank of America. A bank that overlooks five billion dollars in suspicious transactions deserves what it got, and if anything the fine is small relative to the institution. Seventeen cents a share is a rounding error to a company that size, which is its own problem and an argument for larger penalties rather than smaller ones.

Money laundering is how cartels move cash, how sanctioned regimes evade sanctions, and how fraud proceeds get cleaned. Banks are the chokepoint. They should be held to a hard standard.

What they should not be is the only institution in the country held to it.

The actual ask.

Every federal benefit program should face the same basic requirement the government imposes on a bank. Verify the identity. Check the claim against records you already hold. Flag the anomaly. Report it.

None of that is exotic. Treasury just proved it works, by connecting the Social Security death file to the payment system and catching 13,500 improper payments in a single fiscal year.

That fix required an executive order and an act of Congress to accomplish something a bank compliance officer does before lunch.

Fine the banks. Fine them seriously.

Then go run the same audit on the agencies writing the checks, and tell the country what you find.