Bank of America used its government-backed U.S. banking to finance controversial trades that helped clients avoid taxes, the Wall Street Journal (WSJ) reported on Wednesday, citing internal documents and people familiar with the matter.
The bank last year started phasing out the practice of using funds from the U.S. unit to finance transactions by its European investment-banking arm that, among other things, helped hedge funds avoid taxes on stock dividends.
"BANA (Bank of America National Association) no longer finances dividend arbitrage activity," a Bank of America spokesperson told the WSJ.
The practice dates back to at least 2011 when senior Bank of America investment-bank officials in London started pushing subordinates to adopt the policy to take advantage of the lower funding costs enjoyed by the unit, the WSJ said.
The WSJ reported that a current Bank of America employee had made whistleblower filings to the U.S. Securities and Exchange Commission (SEC) about the matter.
The SEC offered no comment when asked whether the WSJ report was accurate, or whether an investigation into Bank of America's activities was ongoing.
The report comes several months after the Justice Department announced a $16.65 billion settlement with Bank of America, the nation's second largest bank, over its role in the sale of mortgage-backed securities in the run-up to 2009 financial crisis.
That deal, then the second largest with United States prtosecutors, required Bank of America to pay a $9.65 billion cash penalty and provide about $7 billion of relief to struggling borrowers.
Al Jazeera and wire services