TD Bank fined $3B US after pleading guilty in historic U.S. money-laundering case
U.S. attorney general says penalty the largest under the country's Bank Secrecy Act
Toronto-Dominion Bank has been ordered to pay a total of $3.09 billion US in fines after pleading guilty to multiple charges, including conspiracy to violate the Bank Secrecy Act and commit money laundering.
The bank has also received a cease-and-desist order and non-financial sanctions from the Office of the Comptroller of the Currency (OCC), including an asset cap that put limits on its growth in the U.S. after it was found that TD had "significant, systemic breakdowns in its transaction monitoring program."
U.S. Attorney General Merrick Garland said TD created an environment "that allowed financial crime to flourish."
"By making its services convenient for criminals, it became one," he said in a press conference Thursday. "Today, TD Bank became the largest bank in U.S. history to plead guilty to Bank Secrecy Act program failures, and the first bank in history to plead guilty to conspiracy to commit money laundering."
He said TD admitted in its plea agreement it allowed three money-laundering networks to transfer more than $670 million US through TD Bank accounts over a six-year period, actions which many employees were aware of, yet went unaddressed.
At least one of those schemes involved five TD Bank employees laundering drug proceeds.
The sweeping penalties announced on Thursday include consequences meted out by several regulators, including the OCC and the U.S. Department of Justice (DOJ), with the combined fines adding up to just over $3 billion US.
As part of this, TD Bank has agreed to pay more than $1.8 billion US to the DOJ in penalties for criminal charges.
Bharat Masrani, CEO of TD Bank Group, said in a statement that the bank has "taken full responsibility," and will be making "the investments, changes and enhancements required to deliver on our commitments."
"This is a difficult chapter in our bank's history. These failures took place on my watch as CEO and I apologize to all our stakeholders."
Enormous deposits, years of suspicious activity, little action
For years, TD Bank "willfully" failed to monitor transactions properly, leaving gaping holes that allowed millions of dollars to flow through the bank, the DOJ revealed.
One money-laundering network "dumped piles of cash on the bank's counters," while another another "allegedly withdrew amounts from ATMs 40 to 50 times higher than the daily limit for personal accounts," U.S. Attorney Philip R. Sellinger for the District of New Jersey said in a statement.
In another money-laundering scheme, one TD Bank employee, identified as "David," moved more than $470 million dollars in illicit funds through TD Bank branches in the U.S. This individual, who has separately pled guilty to laundering drug proceeds through the bank, Garland said, found that "TD Bank had the most permissive policies and procedures, and so chose to launder most of his funds there."
On one occasion, David deposited more than $1 million US in cash in a single day, then moved the funds out of the bank using official bank cheques and wire transfers. More than $57,000 US in gift cards was provided to other bank employees as bribes.
Many employees were aware of the probable illegality of these actions.
In August 2021, a TD Bank store manager sent an email to another store manager, commenting, "You guys really need to shut this down. Lol," Garland said. On another occasion, a store manager implored their supervisor to do something, stating that their tellers didn't feel comfortable handling the suspicious transactions.
TD Bank's own internal audit group repeatedly highlighted concerns about the bank's transaction monitoring program between 2014 and 2022, according to the DOJ, but the program remained largely stagnant nonetheless, suffering with chronic underfunding and understaffing.
In the case involving five TD Bank employees, the DOJ stated that employees issued dozens of ATM cards to money-launderers, allowing for the laundering of approximately $39 million US. More than two dozen individuals have been charged by the Justice Department in connection with these schemes so far, including two TD bank employees.
TD Bank to restructure, undergo monitoring
The bank has agreed to a major restructuring of their anti-money-laundering program, as well as three years of monitoring and five years of probation. The implementation of any new programs or services in their U.S. branches will have to go through more stringent approval processes as well, as ordered by the OCC.
The asset cap placed on TD Bank by the Office of the Comptroller of the Currency will not apply to any of the bank's business in Canada or other countries. But it will curtail growth within the U.S., where TD is the 10th largest bank.
Richard Powers, an associate professor at the Rotman School of Management at the University of Toronto, told CBC News prior to the ruling's announcement that approximately 25 per cent of TD's revenue comes from its U.S. operations.
"They've been growing through acquisition," he said. "If that is put on hold or if that has restrictions put on it, how do they maintain that growth?"
Last month, the bank announced that Raymond Chun would replace Masrani upon his retirement next year. The outgoing chief executive said at the time that he took responsibility for shortcomings that occurred under his watch, and echoed those sentiments on a conference call with investors and media on Thursday.
"We should have done better," he said on the call. "We know what the issues are, we are fixing them as we move forward. We're ensuring that this never happens again."
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With files from The Canadian Press