TD Bank (TD) faces a $3 billion fine for money laundering

Toronto Dominion Bank (TD) (TSE:TD) is expected to pay approximately $3 billion in fines and face restrictions on U.S. growth following a regulatory settlement over anti-money laundering failures, the Wall Street Journal reported. The settlement involves the Canadian bank’s U.S. unit, which is expected to plead guilty on Thursday.

The settlement stems from an investigation by U.S. authorities into TD Bank’s internal controls and the bank’s failure to detect and prevent money laundering activities linked to drug cartels. It’s worth noting that the investigation involved several regulatory agencies, including the Department of Justice (DoJ), the Financial Crimes Enforcement Network (FinCEN), the Office of the Comptroller of the Monet (OCC), and the Federal Reserve .

As part of the settlement, the OCC is expected to impose a cap on TD’s U.S. retail banking assets, limiting its ability to expand its business in the country. In addition, both the DOJ and FinCEN will likely appoint independent monitors to oversee the bank’s operations and ensure compliance with the settlement terms for four years.

Shares are up 14%, but regulatory challenges lie ahead

It’s worth noting that the stock is up 14% over the past three months. The positive effect can be attributed to the bank’s strong financial situation. For example, the company’s adjusted revenue and profit rose 10% and 5%, respectively, in the most recent third quarter. Additionally, investors welcomed the retirement announcement of CEO Bharat Masrani, which was revealed last month amid the ongoing investigation.

However, the regulatory impact could weigh on the recent impressive share price performance.

Is TD Bank Stock a Good Buy?

As for Wall Street, TD stock has a consensus rating of Moderate Buy, based on six Buys and six Holds assigned in the last three months. At $64.43, TD Bank’s average price target implies 1.45% upside potential.

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