Bangladesh, Oct. 20 -- The US Treasurys $1.2 billion penalty against Bank of America (BoA) has exposed a troubling contradiction in the nations financial oversight system: major banks have faced criticism for restricting lawful customers over political or religious affiliations while failing for years to identify and report enormous volumes of potentially illicit financial activity.

The penalty, among the largest in Treasurys history and the largest ever imposed by the Office of the Comptroller of the Currency (OCC), underscores the consequences of inadequate anti-money laundering controls at one of Americas largest financial institutions.

According to Treasury findings, Bank of America failed to meet fundamental obligations under the B...