TD Bank faces $3 billion fine and growth restrictions in US settlement over anti-money laundering failures – Toronto-Dominion Bank (NYSE:TD)

Toronto Dominion Bank T.D is reportedly preparing to settle charges related to its alleged failure to monitor money laundering by drug cartels, the Wall Street Journal said in an exclusive report.

The Canadian bank is expected to pay about $3 billion in fines and face restrictions on its U.S. growth.

Under the expected agreement, TD Bank’s U.S. entity is likely to plead guilty to criminal charges arising from a DOJ investigation.

This settlement could be announced as soon as today and involves multiple agencies, including the U.S. Department of Justice (DOJ), the Office of the Comptroller of the Monet (OCC), the Financial Crimes Enforcement Network (FinCEN), and the Federal Reserve .

According to the WSJ report, the DOJ and FinCEN plan to set up independent regulators to oversee the bank’s compliance with anti-money laundering regulations. The FinCEN monitor will reportedly remain in effect for four years.

The penalties will be split between the DOJ and FinCEN, with the DOJ receiving $1.8 billion and FinCEN receiving $1.3 billion.

The bank, together with the outgoing CEO, has recognized the severity of its AML shortcomings Bharat Masrani states that solving these problems is a top priority.

Masrani, who announced his decision to step down as CEO later this year, has been at the forefront of TD’s efforts to address regulatory issues. In August, the bank set aside another $2.6 billion in anticipation of settlement costs.

TD Bank will host a conference call today.

The case has had significant consequences for TD, including halting its $13.4 billion acquisition First Horizon Corporation FHN due to concerns from US regulators about the bank’s capabilities to combat money laundering.

The companies terminated the merger agreement in May 2023, which was initially announced in February 2022. TD paid First Horizon a cash payment of $200 million and the $25 million consideration due to First Horizon under the merger agreement.

The OCC will impose an asset ceiling on TD’s U.S. operations, similar to the restrictions imposed Wells Fargo Co WFC in 2018 after the fake account scandal, the report points out.

The investigation into TD Bank intensified when federal authorities discovered that a Chinese criminal group had laundered millions of dollars from the sale of fentanyl through TD’s New York and New Jersey branches, bribing bank employees.

This incident has forced TD, among other things, to review its internal controls and strengthen its AML and investigation teams with new hires.

Price promotion: At last check on Thursday, TD stock was down 4.74% to $60.50 during the premarket session.

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