The US Treasury Department said the banking giant failed to report more than $5bn in suspicious activity to the government, claiming that $1bn of which posed a threat to national security and illicit finance risks.

According to the Treasury, the failings included not flagging transactions linked to possible Chinese money laundering networks or trade-based laundering “with a substantial nexus to the southwest border”.

It is the third-largest fine imposed by the department, Treasury Secretary Scott Bessent said: “When a bank of this size fails to meet its anti-money laundering and sanctions obligations, the consequences extend far beyond its own walls, exposing the entire US financial system to significant illicit finance risks.”

The US Treasury said the bank relied too much on inquiries from outside parties like other financial institutions and law enforcement instead of its own internal controls, adding it “effectively outsourced to third parties a substantial portion of its proactive detection and reporting obligations.”

It add that the Bank of America admitted, as part of the settlement, that it “willfully violated” the Bank Secrecy Act by failing to maintain a compliant anti-money laundering programme, conduct required due diligence on foreign correspondent accounts and file suspicious activity reports.

The fine included penalties imposed by the Office of Foreign Assets Control (OFAC) and the Office of the Comptroller of the Currency (OCC). The OCC levied its largest penalty ever of $750m.

The OAFC said its settlement with the bank was tied to 475 apparent violations of sanction programmes including those on Russia and Iran, global terrorism and narcotics. The amount was $11.6bn, adding that it reflected the determination the apparent violations were “non-egregious”.

Bank of America said: “Our team is far along with and committed to completing the work required to address the issues raised by our regulators. Our third-quarter results will include a non-tax-deductible charge of $1.2 billion impacting net income by approximately 17% per share

“We have already dedicated substantial personnel and resources to our ongoing remediation efforts, and those costs are in the current expense base.”