'By making its services convenient for criminals, TD Bank became one' says Garland

Following speculation Thursday, the long-running investigations into TD Bank Group’s anti-money-laundering compliance deficiencies in the US has reached a settlement.

The Canadian bank’s US subsidiaries TD Bank US Holding Company and TD Bank NA pleaded guilty to charges related to deficiencies in their anti-money laundering regime and agreed to pay penalties of around US$3.09 billion. TD says this will be mostly covered by previous provisions.

The settlement also means that the total assets of TD's two US banking subsidiaries (TD Bank, NA and TD Bank USA, NA) cannot exceed $434 billion and they will face more stringent scrutiny of new products, services, markets, and stores, along with enhanced overall monitoring.

"We have taken full responsibility for the failures of our US AML program and are 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," said Bharat Masrani, group president and CEO of TD Bank Group.

The bank held a conference call Thursday and published slides detailing the resolution of the AML investigations.

TD said that it has the “financial strength, stability, and operational flexibility to deliver the required US AML remediation program, continue to serve the financial needs of its more than ten million US customers, and invest to strengthen the business.”

"Money laundering is a serious global threat, and our US operation did not maintain an adequate AML program to thwart criminal activity. The Board has and continues to take action to address these failures and hold those responsible accountable. We have appointed new leaders across our US operations, overhauled our US AML team, and prioritized investments to drive the required changes," said Alan MacGibbon, Chair of the Board, TD Bank Group. "Enhancing our program and meeting our obligations today and into the future is the number one priority of the Board and management."

Among the requirements of the bank’s settlement with the Federal Reserve, TD must “establish a new office in the United States dedicated to remediating the deficiencies identified in the order” and “relocate to the United States the parts of its anti-money laundering compliance program that are responsible for complying with US law.”

Commenting Thursday, principal deputy assistant attorney general Nicole M. Argentieri said that TD had co-operated strongly with the investigations but noted that the deficiencies in its AML programs had remained for a decade.

“AML employees joked that the Bank’s failed AML system made TD an “easy target” and a “convenient” bank for bad actors. And they were right. TD’s failed AML compliance program created vulnerabilities that criminals — including TD’s own employees — used to launder money through the Bank,” Argentieri said. “All told, three large money laundering networks, two prosecuted by our partners in the District of New Jersey and the third prosecuted in the District of Puerto Rico, laundered over $670 million through TD.”

WHAT THE REGULATORS SAID

The settlement of the charges against TD involved several regulators and authorities including the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board, the Financial Crimes Enforcement Network (FinCEN), the Department of Justice and the United States Attorney's Office for the District of New Jersey.

Financial penalties include $1.8 billion to the Department of Justice, a record $1.3 billion to FinCEN, $450 million to the OCC, and $123.5 million to the Fed, among others.

The US authorities did not hold back on their criticism of TD:

“By making its services convenient for criminals, TD Bank became one,” said Attorney General Merrick B. Garland. “Today, TD Bank also became the largest bank in US history to plead guilty to Bank Secrecy Act program failures, and the first US bank in history to plead guilty to conspiracy to commit money laundering. TD Bank chose profits over compliance with the law — a decision that is now costing the bank billions of dollars in penalties. Let me be clear: our investigation continues, and no individual involved in TD Bank’s illegal conduct is off limits.”

Charges have already been brought against around two dozen individuals in relation to the case, including two TD employees.

“TD Bank’s persistent prioritization of growth over controls allowed its employees to break the law and facilitate the laundering of hundreds of millions of dollars. The bank’s blatant risk management failures attracted illicit actors and are egregious and unacceptable,” said Acting Comptroller of the Currency Michael J. Hsu. “The OCC’s coordinated and comprehensive action, including the imposition of an asset cap, will ensure that the bank focuses on building proper controls commensurate with its risk profile.”

“The vast majority of financial institutions have partnered with FinCEN to protect the integrity of the US financial system. TD Bank did the opposite. From fentanyl and narcotics trafficking, to terrorist financing and human trafficking, TD Bank’s chronic failures provided fertile ground for a host of illicit activity to penetrate our financial system,” said Deputy Secretary of the Treasury Wally Adeyemo. “Our historic action represents a significant step in safeguarding our country and communities from criminal activity like fentanyl and human trafficking by requiring TD Bank to fix the vast deficiencies in its safeguards against money laundering. The Biden-Harris Administration is committed to taking action to keep our communities safe from the sort of behavior facilitated by illicit finance and enabled by TD Bank’s lax oversight, and we are making clear that financial institutions will face severe repercussions if they fail to maintain necessary safeguards.”