TD Bank Agrees to Pay $3 Billion in Historic Money Laundering Settlement

Toronto-Dominion Bank (TD) is one of Canada’s biggest financial institutions. It has accepted criminal charges in the United States for facilitating the transfer of “illicit funds worth hundreds of millions of dollars” by drug-organized crime groups.

The bank has agreed to pay “more than $3bn (£2.3bn)” as a settlement for money laundering.

Key Reasons for TD Bank Penalty

According to investigations;

• The bank has failed to apply adequate policies and procedures against money laundering for almost ten years.
• It has not taken any proper action against the suspicious activities highlighted by bank staff.
• One of the suspicious transactions was a client’s deposition of “$1m in cash” daily.

Consequences of AML Failures

• According to anti-monetary laundering (AML) legislation, the most significant penalty in the form of a fine has been imposed on TD Bank.
• The bank’s growth in the US is limited due to money laundering charges.

Bank’s Official Response

TD Bank’s CEO has taken “full responsibility for the failures” and acknowledged the inability to comply with AML legislation.

Bharat Masrani has announced that the bank is strong enough to bear the impact of settlement and assured that the “bank would be making investments, changes and enhancements required to deliver on our commitments.”

Bank Strengthens AML Compliance

Further, the bank stated that achieving robust compliance is a “multi-year process.”

However, the bank has taken the initiative by implementing an effective AML regime and appointing 700 new staff members skilled in the AML compliance framework.

Apology from The CEO

Bharat Masrani stated on 10 October, “This is a difficult chapter in our bank’s history. These failures took place on my watch as CEO, and I apologize to all our stakeholders.”

After serving the bank for almost ten years, Mr Masrani last month declared his retirement that he would “retire in April 2025.”

Largest US Bank to Plead Guilty

• According to the US Justice Department, TD Bank is the largest financial institution in US history to admit its failures under the Bank Secrecy Act (BSA).
• It is also the first to accept involvement in a money laundering conspiracy.

Growth Restrictions Reserved for Severe Case

According to an agreement with regulators, the US retail business has growth restrictions, usually imposed on entities involved in serious crimes. “Fake account fraud” was exposed many years ago at Wells Fargo.

TD Bank Criticized for Cooperating with Criminals

Lawyer “General Merrick Garland” stated that the bank was assisting the investigation, and investigations were anticipated individually.

He added, “By making its services convenient for criminals, TD Bank became one.”

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Severe Compliance Gaps within TD Bank

US authorities announced at a press conference that the bank is the 10th largest in the US. Despite its significant growth, it has neglected to invest in compliance programs.

In other words, it “starved” when it came to investing in these programs for the betterment of the financial sector.

Investigators stated at conferences that “By 2018, it failed to monitor more than 90% of the transactions on its network, activity worth more than $18tn.”

TD’s Reputation as ‘Convenient for Criminals’

The lack of AML controls and compliance was so well-known that all staff members sarcastically referred to the bank’s goal as “America’s most convenient bank marketed toward criminals.”

Specific Money Laundering Schemes

• Authorities declared that one client laundered “more than $470m” using TD Bank in drug proceeds.
• He deposited large amounts of cash in banks and bribed the staff members with “gift cards” to facilitate illicit activities.
• This approach permits laundered money from fentanyl users to be sent back to Mexico and China-based drug networks.
• Another scheme involving five bank members occurred, where staff assisted in issuing multiple ATM cards to transfer “$39m in illicit funds” to Colombia.

TD Bank’s Global Presence

• TD ranks sixth in the largest bank list in North America based on its assets.
• It provides services to “27.5 million customers” worldwide.

Penalties and Compliance Oversight

The settlement was declared on Thursday by the U.S. Department of Justice, and a third party will monitor AML compliance for a certain period.

• As a penalty, “$1.8bn” will go to the U.S. Department of Justice and $1.3bn” will be paid to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).
• Additional payments will be made to other authorities, such as “The Office of the Comptroller of the Currency and the Federal Reserve,” stated the press release.

After the announcement of the news, TD Bank’s shares dropped to 5% in the stock market.