Canada-based financial institution TD Bank has announced its agreement to pay over USD 3 billion, pleading guilty to criminal charges related to money laundering in the US.
As detailed by regulators, the fine follows TD Bank’s failure to appropriately monitor money laundering by drug cartels and other criminals, allowing them to transfer hundreds of millions of dollars in unlawful funds. In addition, the bank did not enforce sufficient defences against money laundering for nearly 10 years. It did not efficiently act when staff members flagged cases of abuse, including a customer making daily deposits of USD 1 million in cash.
TD Bank agrees to pay USD 3 billion in money laundering settlement
Moreover, TD Bank is now facing restrictions in its development strategy in the US, with the financial institution being subject to four years of monitoring by the Financial Crimes Enforcement Network (FinCEN). The regulator intends to closely monitor the lender and ensure that it is following the agreement. Also, the US Federal Reserve fined TD Bank and is set to force the financial institution to relocate its Anti-Money Laundering (AML) compliance office to the US.
TD Bank’s fine comprises a USD 1.3 billion penalty that is set to be paid to the US Treasury Department’s FinCEN. At the same time, the bank will direct USD 1.8 billion to the US Justice Department, pleading guilty to resolve the US Government’s investigation that it violated the Bank Secrecy Act and supported money laundering.
Transaction monitoring failings
According to a legal filing, over 90% of transactions conducted through the financial institution went unmonitored between January 2018 and April 2024, which in turn allowed three money laundering networks to collectively transfer over USD 670 million via TD Bank accounts. Also, officials underlined that one customer used TD Bank to launder over USD 470 million in drug proceeds, making substantial cash deposits and bribing staff with gift cards.
During the same period, a scheme enabled payments from drug users to flow back to networks in Mexico and China, while another one involved the participation of five bank staff, who allowed the issuing of ATM cards and facilitated the transfer of USD 39 million in illicit funds to Colombia.
Scaling compliance and minimising AML risk
When commenting on the announcement, representatives from TD Bank mentioned that they take full responsibility for the failures of the financial institution’s US AML program, aiming to invest, change, and augment all necessary procedures to deliver on its commitments. Additionally, the bank guaranteed that it holds sufficient liquidity to pay the fine and proceed with its operations.
Furthermore, regulators mentioned that the bank cooperated with the investigation and further individual prosecutions were expected. As part of the agreement, TD Bank intends to scale its AML surveillance, planning to hire over 700 new specialists with experience and qualifications in money laundering prevention, financial crimes, and AML remediation, and to deploy new processes to optimise the detection of financial crime risk.
TD Bank fined $3bn in historic money laundering settlement
TD Bank, one of Canada’s biggest lenders, has agreed to pay more than $3bn (£2.3bn) and pleaded guilty to criminal charges in the US after allowing drug cartels and other criminals to transfer hundreds of millions of dollars in illicit funds.
Prosecutors said the bank operated with inadequate guards against money laundering for nearly a decade, failing to act even when staff flagged obvious cases of abuse, such as a customer making daily deposits of $1m in cash.
The lender is now facing restrictions on its growth in the US – as well as the biggest fine ever under anti-monetary laundering law.
The chief executive of TD Bank said the bank was taking “full responsibility” for its failures.
Bharat Masrani said the bank had the financial strength to weather the situation and would be making “the investments, changes and enhancements required to deliver on our commitments”.
The bank said it would be a multi-year process, but it had already taken some steps to overhaul its anti-money laundering programme, adding more than 700 new staff specialised in the issue.
“This is a difficult chapter in our bank’s history. These failures took place on my watch as CEO and I apologise to all our stakeholders,” he said on Thursday.
Mr Masrani announced last month he would retire in April 2025 after a decade at the bank’s helm.
TD Bank is the largest lender in US history to plead guilty to failures under the Bank Secrecy Act and the first to plead guilty to conspiracy to commit money laundering, the US justice department said.
The growth restriction its US retail business faces under its agreement with regulators is unusual – reserved for severe cases of wrongdoing, such as the fake account fraud uncovered at Wells Fargo several years ago.
Attorney General Merrick Garland said the bank was cooperating with the investigation and further individual prosecutions were expected.
“By making its services convenient for criminals, TD Bank became one,” he said.
At a press conference announcing the charges, US officials said the bank – the 10th largest in the US – had “starved” its compliance programmes of investment, even as it grew.
By 2018, it failed to monitor more than 90% of the transactions on its network, activity worth more than $18tn, prosecutors said at a press conference.
The gaps in compliance were so well-known internally that staff joked that the bank’s motto – “America’s most convenient bank” – was marketed toward criminals, they said.
Officials said one customer used TD Bank to launder more than $470m in drug proceeds, making large cash deposits and bribing staff with gift cards.
The scheme allowed payments from fentanyl users to flow back to drug networks in Mexico and China, officials said.
Officials said another scheme involved participation of five bank staff, who helped to issue dozens of ATM cards, facilitating the transfer of $39m in illicit funds to Colombia.
TD is the sixth largest bank in North America by assets and serves over 27.5 million customers around the world.
The settlement announced on Thursday will include a period of outside monitoring.
The penalties includes $1.8bn to the justice department and $1.3bn to the Treasury’s Financial Crimes Enforcement Network, as well as payments to other regulators including the Office of the Comptroller of the Currency and the Federal Reserve.
Shares plunged more than 5% on the news.
Sources: https://www.bbc.com/news/articles/c153d14vqwyo, https://www.benefitsandpensionsmonitor.com/news/industry-news/td-bank-hit-with-us3bn-fine-and-asset-cap-shaking-up-us-expansion-plans/389085