🏦 TD Bank pleaded guilty in U.S. money-laundering case: $3.09B

Toronto-Dominion Bank was ordered to pay $3.09 billion in fines after pleading guilty to multiple charges, including conspiracy to violate the Bank Secrecy Act and commit money laundering, CBC News reported on Oct. 10, 2024. The bank is Canadian. The bill is American. Several regulators sent invoices on the same day.

The Justice Department took more than $1.8 billion in penalties for the criminal charges, CBC reported. CNN reported that a $1.3 billion penalty went to the Treasury's Financial Crimes Enforcement Network, a record fine for a bank. MissFortune notes that the fine is the part with a number on it. The rest of the package is the part that costs more.

The penalty, and who held it

CNN reported that TD's U.S.-listed shares slumped 6% after the announcement. On an analyst call, the bank said it expected a one-time charge of $1.5 billion after taxes and would reduce 10% of its assets to address the fine, CNN reported. The Federal Reserve also fined the bank, CNN said, and will force it to move its anti-money-laundering compliance office to the United States.

The market had braced for less. Months earlier, a National Bank analyst told clients that total penalties could "easily hit" $2 billion, the Toronto Star reported in May 2024. TD had set aside $450 million in provisions by then, the Star said. The final figure was well past both.

The cap and the monitor

The cash is the short-term pain. The long-term one is the Comptroller's asset cap, which curtails growth in the U.S., where TD is the 10th-largest bank, CBC reported. Richard Powers, a University of Toronto professor, told CBC that about 25 per cent of TD's revenue comes from U.S. operations and that the bank had been "growing through acquisition." A cap puts that route on hold.

The supervision runs long. The bank agreed to a restructuring of its compliance program, three years of monitoring and five years of probation, NPR reported. CNN reported a further four years of monitoring by the Financial Crimes Enforcement Network. Under the Comptroller's order, any new program or service in U.S. branches faces a tougher approval process, CBC said.

CNN also noted that a cap is extraordinary but not unprecedented. Wells Fargo was put under similar growth limits in 2018 and, as of that report, had not convinced regulators to lift them.

What the plea admitted

CNN, citing a legal filing, reported that more than 90% of transactions went unmonitored between January 2018 and April 2024. That, the filing said, "enabled three money laundering networks to collectively transfer more than $670 million through TD Bank accounts." The bank's own internal audit group repeatedly raised concerns about transaction monitoring between 2014 and 2022, per the Justice Department as reported by CBC. The program stayed largely stagnant, chronically underfunded and understaffed.

"By making its services convenient for criminals, it became one."

U.S. Attorney General Merrick Garland, at a press conference on Oct. 10, 2024, per CBC News

The detail is where it gets vivid. One network moved more than $470 million, and employees collected more than $57,000 in gift cards, CNN reported, to "ensure employees would continue to process their transactions." Garland said one store manager wrote to another in August 2021: "You guys really need to shut this down. Lol," CBC reported. In a second scheme, five employees worked with criminal organizations to launder $39 million to Colombia, per Garland as reported by NPR. In a third, NPR reported, the bank did not file a required suspicious activity report on shell-company accounts that moved more than $100 million until law enforcement alerted it.

Garland said about two dozen people have been prosecuted, including two TD employees, and that the investigation is ongoing, NPR reported.

The apology, the exit and the objection

"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."

TD Bank Group CEO Bharat Masrani, in a statement quoted by CBC News

Masrani had already announced in September 2024 that he would retire on April 10, 2025, with Raymond Chun succeeding him, American Banker reported. He said then that he took full responsibility for the anti-money-laundering failures. A Jefferies analyst told American Banker that Chun's distance from U.S. retail banking "probably moved him up the list."

"Big banks treat government fines as the cost of doing business."

Sen. Elizabeth Warren, in a statement quoted by CNN Business

Warren said the settlement "lets bad bank executives off the hook." In December 2024, she and Sen. Ron Wyden asked TD what its executives and employees knew about one laundering ring, according to a letter the Wall Street Journal reviewed. The excerpt of that report in the source pack does not say whether TD has replied.

Where it sits on the bank-penalty shelf

Garland described TD as the largest bank in U.S. history to plead guilty to Bank Secrecy Act program failures and the first to plead guilty to conspiracy to commit money laundering, CBC reported. The bigger numbers belong to older cases. The shelf looks like this.

HSBC avoided an indictment with a deferred prosecution agreement, which the BBC's Robert Peston described as putting the bank "on probation." BNP pleaded guilty and had to forfeit a core business operation, dollar clearing in certain units, the New York Times reported. TD's punishment is neither of those. It is a ceiling on how big its U.S. business may get while the compliance work is done.