TD Bank has been hit with a record $3 billion fine for antitrust money laundering

More than 90% 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.

“I want to be clear: These systemic failures have not only created hypothetical vulnerabilities, but they have also resulted in actual, material harm to American citizens and communities,” Deputy Treasury Secretary Wally Adeyemo said in a statement. “Time and time again, TD Bank, unlike its peers, prioritized growth and profits over compliance with the law. The bank made the drug trade possible.”

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.

“This is a difficult chapter in our bank’s history,” TD Bank CEO Bharat Masrani said in a statement. “These failures occurred under my watch as CEO and I apologize to all our stakeholders.”

“We have taken full responsibility for the failures of our US anti-money laundering program and are making the investments, changes and improvements necessary to meet our commitments,” Masrani added.

TD is stepping up its anti-money laundering oversight efforts, including hiring more than 700 new specialists with “experience and qualifications in money laundering prevention, financial crime and AML remediation,” and is also deploying new processes to “better prevent, detect and measure the risk of financial crime,” the bank said.

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 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.

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

TD ensured that the company has sufficient liquidity to pay the fine and continue its operations. In a call with analysts, the bank said it expects to take a one-time charge of $1.5 billion after taxes and cut 10% of its assets to address the huge fine.

“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.”

Money laundering by TD bank

First, an individual TD Bank employees knew as David moved more than $470 million in illicit funds through TD Bank branches in the United States over the course of a three-year period.

David has separately pleaded guilty to laundering drug proceeds through the bank.

David had attempted to launder money through numerous financial institutions. But he found that TD Bank had the most permissive policies and procedures and chose to launder most of his money there.

He also bribed TD Bank employees with more than $57,000 in gift cards in furtherance of his scheme.

David’s illegal behavior was obvious, to say the least. On more than one occasion, he deposited more than $1 million in cash in a single day. He then immediately withdrew the money from the bank using official bank checks and bank transfers.

TD Bank employees at many levels understood and recognized the likely illegality of David’s activities.

In August 2020, a TD Bank store manager emailed another store manager and commented, “You guys really need to shut this down LOL.”

In late 2020, another store manager implored his supervisors – several TD Bank regional managers – to take action, noting that “things are getting out of hand and my tellers are at the point where they don’t feel comfortable with handling these transactions. ”

In February 2021, a TD Bank store employee noticed that David’s network had purchased more than $1 million worth of official bank checks with cash in a single day. The employee asked: “How is that not money laundering?” A back office employee responded, “Oh, that’s 100% true.”

In a second, separate money laundering scheme, five TD Bank employees conspired with criminal organizations to open and maintain accounts at the bank that were used to launder $39 million to Colombia, including drug proceeds.

That money laundering organization used the same Venezuelan passports to open multiple accounts at TD Bank. Sometimes the same passport was used to obtain multiple debit cards for one account.

Despite significant internal red flags, the bank did not determine that its own employees were conspiring to launder tens of millions of dollars into Colombia until police arrested one of them.

In yet a third scheme, detailed in today’s indictment, a money laundering ring maintained accounts at TD Bank for at least five shell companies. It used these accounts to transfer more than $100 million in illegal funds through the bank.

Although store employees reported suspicious activity related to these accounts, the bank did not file a suspicious activity report until law enforcement notified the bank of the money laundering network’s activities. By then, the accounts had been open for more than 13 months and had been used to transfer nearly $120 million.

On several occasions, bank employees openly joked about the bank facilitating criminal activity.

In one case, a compliance officer asked a manager what “the bad guys” thought of the bank. The manager replied: “Lol. Easy target.”

Other employees continued to joke on the bank’s instant messaging platform about the bank’s motto: “America’s Most Convenient Bank.” They linked it to the bank’s approach to combating money laundering.

For example, a compliance officer asked a colleague why “all the really terrible people bank here lol.”

The colleague replied: “because… we are handy.”

There is nothing wrong with a bank trying to make its services convenient for its honest customers.

But there is something terribly wrong with a bank that knowingly makes its services useful to criminals.

The Bank Secrecy Act requires financial institutions such as TD Bank to establish and maintain compliance programs that provide protection against money laundering.

But TD Bank chose profit over compliance to keep costs down.

That decision is now costing the bank billions of dollars in criminal and civil penalties.

Less than a year ago, the Justice Department obtained guilty pleas from Binance, the world’s largest cryptocurrency exchange, and from its founder and CEO. We also received one of the largest corporate fines in American history.

Because of the seriousness of the charges, some critics, including Democratic Massachusetts Sen. Elizabeth Warren, said the sentences did not go far enough.

“Major banks view government fines as the cost of doing business,” Warren said in a statement. “This settlement ensures that bad bank executives can go free for allowing TD Bank to be used as a criminal slush fund. The Department of Justice and the Office of the Comptroller of the Currency must do a better job enforcing our anti-money laundering laws.”

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.