Banking giant hoping for “global resolution” to drug-money probes

Toronto-Dominion Bank is hoping it can soon work out a “global resolution” to a series of regulatory and law-enforcement probes it faces in the US over allegations that the lender was used for the laundering of drug money.

Chief Executive Officer Bharat Masrani addressed employees of the bank in a series of communications on Monday and in a video town-hall meeting with about 1,800 top leaders, during which he warned that “this is going to get tougher before it gets better.”

“I’m hoping that we can resolve this as soon as possible. We’re looking at a global resolution,” he said, according to a transcript of the meeting seen by Bloomberg News. “But in the meantime, it is critical that we hold our heads high.”

Masrani was in Hollywood, Florida, on Monday for a meeting of the bank’s US regional leaders on the topic of anti-money-laundering and also sent an all-employee email to staff late in the day, touching on many of the same issues he raised in the video meeting.

Toronto-Dominion is facing probes by three different regulators as well as the US Department of Justice, which is investigating the bank over its ties to a $653 million drug-money-laundering case in New York, New Jersey and Pennsylvania, a person familiar with the matter told Bloomberg last week. That probe is focused on how Chinese crime groups used Toronto-Dominion and other banks to hide money from US fentanyl sales, the Wall Street Journal reported last week.

That’s in addition to another case in which an employee at one of the bank’s New Jersey branches was charged with accepting bribes to facilitate the laundering of drug money.

“We’ve been working with the US Department of Justice investigators for some time now,” Masrani told employees. “I should say our system did pick up a lot of this activity but not enough and we were just too slow.”

Apprehending Criminals

Information the bank has provided to law enforcement “has helped, not only apprehend these criminals, but to actually get them in front of a court and be prosecuted,” he said, adding that the bank has produced tens of thousands of documents, video surveillance and forensic analysis to assist authorities.

Toronto-Dominion also conducted an internal investigation and dismissed individuals for code-of-conduct violations, Masrani said.

“Bharat continues to be focused on serving our customers, running the bank, putting in place the actions we’ve taken to address these issues and has spent the last week speaking with senior leaders and colleagues across the bank about the matter and the path forward,” Toronto-Dominion spokesperson Elizabeth Goldenshtein said in an emailed statement.

While Masrani didn’t specify who has been let go, there has been a series of leadership changes at its US business. The bank appointed Leo Salom to run the division in 2022, replacing former US CEO Greg Braca.

Matthew Boss was recently given an expanded mandate to run Toronto-Dominion’s entire consumer-banking business in the US, after previously handling consumer products, including credit cards and residential lending. With the larger role, Boss took over from Ernie Diaz, who was head of US consumer distribution, wealth and auto finance and left the bank at the end of April.

On the compliance side, Toronto-Dominion recruited Chicago-based Herbert Mazariegos away from Bank of Montreal to become chief global anti-money-laundering officer in November. He replaced Mike Bowman.

The Toronto-based lender has invested more than C$500 million ($365 million) to upgrade its overall anti-money-laundering program, Masrani said Monday, adding that it plans to do more.

The bank has overhauled its internal processes, deployed new technologies and put enhanced training in place, he said.

“I think all our colleagues in the US have already experienced that,” Masrani said. “And of course this is going to be rolled out around the world.”

Some analysts have said the bank could face total fines in the range of $2 billion and that its future growth in the US could also be constrained. Toronto-Dominion’s shares fell sharply in the wake of the Journal’s report last week, costing the bank about C$10 billion in market capitalization. Its stock has made a modest recovery so far this week, and was up 1.1% to C$75.95 at 2:51 p.m.