NEW YORK -- TD Bank will pay US$3 billion to settle charges that it failed to properly monitor money laundering by drug cartels, regulators announced Thursday.
The fine includes a US$1.3 billion penalty that will be paid to the U.S. Treasury Department鈥檚 Financial Crimes Enforcement Network, a record fine for a bank. TD also intends to pay US$1.8 billion to the U.S. Justice Department and plead guilty to resolve the U.S. government鈥檚 investigation that the bank violated the Bank Secrecy Act and allowed money laundering.
The U.S. Department of Justice said in a statement that TD Bank had 鈥渓ong-term, pervasive, and systemic deficiencies鈥� in its procedures of monitoring transactions. The first reported the news late Wednesday.
鈥淏y making its services convenient for criminals, it became one,鈥� said Attorney General Merrick Garland, at a press conference Thursday.
More than 90 per cent of transactions went unmonitored between January 2018 to April 2024, which 鈥渆nabled three money laundering networks to collectively transfer more than US$670 million through TD Bank accounts,鈥� according to a legal filing.
鈥淚 want to be clear, these systemic failures did not just create hypothetical vulnerabilities, but they resulted in actual, material harm to American citizens and communities,鈥� Deputy Treasury Secretary Wally Adeyemo said in a statement. 鈥淭ime and again, unlike its peers, TD Bank prioritized growth and profit over complying with the law. The bank enabled drug trafficking.鈥�
In one instance, TD Bank employees collected more than US$57,000 worth of gift cards to process more than US$470 million in cash deposits from a money laundering network to 鈥渆nsure employees would continue to process their transactions鈥� and not declare them in required reports, the DoJ said.
In a related statement, the Office of the Comptroller of the Currency (OCC), a U.S. agency that regulates banks, said TD processed hundreds of millions of dollars of transactions the clearly indicated highly suspicious activity.
鈥淭his is a difficult chapter in our bank鈥檚 history,鈥� TD Bank CEO Bharat Masrani in a statement. 鈥淭hese failures took place on my watch as CEO and I apologize to all our stakeholders.鈥�
鈥淲e have taken full responsibility for the failures of our U.S. [anti-money laundering] program and are making the investments, changes and enhancements required to deliver on our commitments,鈥� Masrani added.
TD is ramping up its anti-money laundering surveillance efforts, including the hiring of more than 700 new specialists with 鈥渆xperience and qualifications in money laundering prevention, financial crimes, and AML remediation,鈥� as well deploying new processes to 鈥渂etter prevent, detect and measure financial crime risk,鈥� the bank said.
The Canadian bank will be subject to four years of monitoring by FinCEN to observe the lender more closely and ensure it is following the agreement.
The U.S. Federal Reserve also fined TD Bank and will force the company to relocate to the United States its anti-money laundering compliance office.
And, in a significant part of the agreement, the OCC is in the United States. Although extraordinary, it is not unprecedented for a bank to be monitored and its growth restricted by the U.S. government. with similar restrictions on growth and a hefty fine for 鈥渨idespread consumer abuses鈥� in 2018 and has yet to convince regulators to remove that asset cap. Wells Fargo previously admitted that its workers responded to wildly unrealistic sales goals by creating as many as 3.5 million fake accounts.
The tough penalties from regulators on Thursday caught Wall Street off guard. TD Bank鈥檚 () U.S.-listed shares slumped 6 per cent as investors brace for higher legal expenses and weaker growth.
TD ensured that it has adequate liquidity to pay the fine and continue operations.
鈥淲e believe that the market was becoming increasingly comfortable with the thought that there would not be any growth restrictions placed on TD,鈥� John Aiken, analyst at Jefferies, wrote in a note to clients on Thursday. 鈥淭D will need to find a new avenue for growth from its traditional reliance on U.S. retail banking.鈥�
Cartel concerns
Officials at the Justice and Treasury departments have grown increasingly concerned by Mexican cartels鈥� use of the U.S. banking system to launder proceeds from the sale of fentanyl and other drugs that kill tens of thousands of Americans annually.
Couriers laundering money for the cartels 鈥渁re opening accounts in banks big and small here in the U.S.,鈥� senior Treasury official told CNN in May.
Treasury 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 try to get a clearer picture of how the cartels are exploiting the financial system, CNN has .
One focus of the meetings, the Treasury official said, is how to use intelligence provided by smaller banks that can spot laundering fronts in their communities.
Because of the seriousness of the accusations, some critics, including Democratic Massachusetts Senator Elizabeth Warren, said the penalties didn鈥檛 go far enough.
鈥淏ig banks treat government fines as the cost of doing business,鈥� Warren said in a statement. 鈥淭his settlement lets bad bank executives off the hook 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 need to do better in enforcing our anti-money laundering laws.鈥�
Last year, TD Bank paid US$1.2 billion to alleging its involvement in an infamous US$7 billion Ponzi scheme orchestrated by disgraced financier Allen Stanford more than a decade ago.
The money was used to pay back victims of the scheme but the bank denied any wrongdoing.
