TD Bank has agreed to pay a nearly $3 billion fine to U.S. authorities and on Thursday pleaded guilty to money laundering-related charges in a case brought by federal prosecutors. He claimed that Canadian banks have made it “convenient” for criminals to open accounts and send money. For almost 10 years.
In settling the case, federal banking regulators also imposed caps on TD’s ability to accept new deposits in the United States, an unusual move that limits the lender’s ability to grow its business in a major market.
The total fine is the largest ever imposed on a bank by U.S. authorities for violating anti-money laundering laws, and is the largest ever imposed on a bank by U.S. authorities in 2012 for transferring billions of dollars to Mexican drug cartels and sanctioned countries such as Iran. That’s more than the $1.92 billion paid by HSBC.
The Office of the Comptroller of the Currency has imposed what is considered the industry’s toughest punishment on TD Bank, imposing an “asset cap” that prevents the bank from growing beyond its current size. TD Bank, which has about $370 billion in assets, is the first major bank to face asset restrictions since Wells Fargo, which has been under restriction since 2018 for a series of frauds, including opening fake bank accounts without customers’ consent. Become a bank.
The bank pleaded guilty to charges of conspiring to fail to maintain an adequate anti-money laundering program and failing to submit accurate transaction reports. Cynthia Adams, TD Bank’s U.S. Chief Legal Officer, entered the guilty plea on behalf of the bank’s U.S. subsidiary before U.S. Judge Esther Salas in U.S. District Court in Newark.
Federal prosecutors said in court filings that some of the bank’s employees enabled criminal organizations to launder money, but the bank was slow to discover and act on it. Prosecutors said they had indicted more than 20 people, including two bank insiders.
“TD Bank has consistently prioritized growth over control, making it easy for employees to break the law and launder hundreds of millions of dollars,” Michael J. Hsu, the acting Comptroller of the Currency, said in a statement. I was able to do it.” “Imposing asset caps allows banks to focus on building appropriate controls commensurate with their risk profile.”
The joint action included federal prosecutors from New Jersey and Washington, the Federal Reserve, the Office of the Comptroller of the Currency, and other financial authorities.
TD Bank Group, Canada’s second-largest bank with about 1,100 branches in the United States, disclosed last year that it was the subject of a U.S. Department of Justice investigation into anti-money laundering compliance. The bank reported in April that it was in discussions with three U.S. banking regulators about penalties for failing to comply with anti-money laundering laws.
At the time, the bank had set aside $450 million in reserves to cover expected fines, but warned investors that the ultimate cost could be much higher. In August, the bank set aside an additional $2.6 billion in reserves for expected fines. To raise the cash, TD Bank sold 40.5 million shares of Charles Schwab stock, reducing its ownership in the bank and brokerage firm from 12% to just over 10%.
“The failure was profound,” Bharat Masrani, TD Bank’s chief executive since 2014, told analysts in August. “We own it. We know what the problems are and we’re fixing them.”
The bank announced last month that Masrani would step down in April and replace him with Raymond Chung, who is now head of the bank’s personal banking division.
TD Bank agreed last year to pay $1.2 billion to settle claims stemming from a $7 billion pyramid scheme involving Stanford Financial Bank, which collapsed in 2009. TD Bank was accused of continuing to do business with Stanford despite obvious red flags about its operations and the financial institution’s management. Fraudulent Certificates of Deposit sold by Stanford University to over 20,000 customers.
The swirling investigation has derailed TD Bank’s planned acquisition of Memphis-based First Horizon Bank. The $13.4 billion acquisition was announced in early 2022 and scrapped last year due to problems with obtaining regulatory approval. TD Bank paid First Horizon a $200 million penalty for breach of contract.
Masrani said in May that TD Bank spent C$500 million (about $365 million) to improve its money laundering controls. Late last year, the bank hired former Bank of Montreal official Herb Mazariegos to run its global anti-money laundering program.
TD Bank’s U.S. branches are spread along the East Coast from Maine to Florida. It has roughly the same number of branches across Canada and is also known as Toronto-Dominion in Canada. The company is the 10th largest bank in the United States, according to Federal Reserve data.
In the settlement, TD agreed to appoint an independent monitor to oversee its anti-money laundering program.
