TD Bank receives record fine for money laundering by drug cartels

New York-

TD Bank will pay $3 billion to settle allegations that it failed to properly police money laundering by drug cartels, regulators announced Thursday.

The fine includes a $1.3 billion fine to be paid to the U.S. Treasury Department’s Financial Crimes Enforcement Network, a record fine for a bank. TD also plans to pay $1.8 billion to the U.S. Department of Justice and plead guilty to resolve the U.S. government’s investigation that the bank violated the Bank Secrecy Act and committed money laundering has allowed.

The U.S. Department of Justice said in a statement that TD Bank had “longstanding, pervasive and systemic deficiencies” in its transaction monitoring procedures. More than 90 percent of transactions went unaudited between January 2018 and April 2024, allowing “three money laundering networks to collectively transfer more than $670 million through TD Bank accounts,” according to a legal filing.

In one case, TD Bank employees collected more than $57,000 in gift cards to process more than $470 million in cash deposits from a money laundering network to “ensure employees would continue to process their transactions” and not report them on required reports, it said DoJ said.

In a related statement, the Office of the Comptroller of the Coin (OCC), a US agency that regulates banks, said TD has processed hundreds of millions of dollars in transactions, clearly indicating highly suspicious activity.

The Wall Street Journal first reported the news on Wednesday.

The Canadian bank will be subject to four years of supervision by FinCEN to more closely observe the lender and ensure its compliance with the agreement.

“The vast majority of financial institutions work with FinCEN to protect the integrity of the U.S. financial system. TD Bank did the opposite,” Deputy Treasury Secretary Wally Adeyemo said in a statement. “From fentanyl and narcotics trafficking to terrorist financing and human trafficking, TD Bank’s chronic failures have provided fertile ground for a host of illegal activities to infiltrate our financial system.”

The US Federal Reserve has also fined TD Bank and will force the company to move its anti-money laundering office to the United States.

And in a significant part of the agreement, the OCC limits TD Bank’s growth in the United States. While extraordinary, it is not unprecedented for a bank to be watched and have its growth restricted by the U.S. government. Wells Fargo was saddled with similar growth restrictions and a hefty fine in 2018 for “widespread consumer abuse” and has yet to convince regulators to eliminate that asset cap. Wells Fargo previously admitted that its employees responded to wildly unrealistic sales goals by creating as many as 3.5 million fake accounts.

TD Bank declined to comment, but the bank plans to hold a call with investors later on Thursday.

The harsh penalties imposed by regulators on Thursday caught Wall Street off guard. US-listed shares of TD Bank (TD) fell 6 percent as investors brace for higher legal costs and weaker growth.

“We believe the market has become increasingly comfortable with the idea that no growth restrictions would be imposed on TD,” John Aiken, an analyst at Jefferies, wrote in a note to clients on Thursday. “TD will need to find a new path for growth from its traditional dependence on US retail banking.”

Cartel concerns

Officials at the Justice and Treasury departments have grown increasingly concerned about Mexican cartels’ use of the U.S. banking system to launder proceeds from the sale of fentanyl and other drugs, which kill tens of thousands of Americans every year.

Couriers who launder money for the cartels “are opening accounts at banks large and small here in the US,” a senior Treasury Department official told CNN in May.

Treasury Department and IRS officials earlier this year began briefing U.S. banks and social media companies, on whose platforms the drugs are often bought and sold, to get a clearer picture of how the cartels’ financial exploit the system, CNN reports.

One of the focuses of the meetings, the Treasury official said, is how to use information from smaller banks to identify money laundering fronts in their communities.

Last year, TD Bank paid $1.2 billion to settle a lawsuit alleging involvement in a notorious $7 billion Ponzi scheme orchestrated by disgraced financier Allen Stanford more than a decade ago.

The money was used to reimburse victims of the scheme, but the bank denied any wrongdoing.

This is a breaking news story. It will be updated.