TD Bank made history as the largest U.S. financial institution ever to admit guilt in breaching federal regulations designed to combat money laundering. The bank has agreed to pay $3 billion in fines to settle these allegations, as announced by government officials on Thursday.
The settlement, which includes an unusual restriction on the bank’s assets and other business constraints, stems from several governmental inquiries into what authorities described as widespread problems within TD Bank. For an extended period, officials said, TD turned a blind eye to warning signs from high-risk customers, fostering an environment where unlawful activities could thrive.
Two branches of the bank entered guilty pleas to charges of conspiracy to launder money and conspiracy to neglect proper filing of reports and maintaining an adequate anti-money laundering system, according to the Justice Department.
“TD Bank chose profits over compliance in order to keep its costs down,” said Attorney General Merrick Garland during a press briefing. He added that TD’s admission marks the largest violation of the U.S. Bank Secrecy Act by a financial institution to date.
The rare asset cap, enforced by the Office of the Comptroller of the Currency, signifies a serious sanction and deals a substantial blow to TD Bank, which has been attempting to grow its presence in the U.S., a market that accounts for a third of its revenue.
“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,” CEO Bharat Masrani expressed in a formal statement.
Over a span of nearly ten years, TD Bank failed to properly scrutinize over $18 trillion in customer transactions, allowing three significant money laundering networks to funnel illegal money, including funds from international drug trade, through its accounts, U.S. officials revealed, labeling the bank’s issues as extensive.
Employees at the bank “openly joked” about the lack of proper oversight on multiple occasions, Garland told the press during the announcement of the plea agreement.
Authorities reported that TD’s failures were known across all levels of the organization. In certain situations, the bank didn’t report questionable activity until law enforcement brought it to their attention. Additionally, tellers were sometimes bribed with gift cards.
“It is no wonder, then, that the motto America’s most convenient bank was used as a joke among employees to describe TD Bank being convenient for criminals,” remarked Philip Sellinger, U.S. Attorney for New Jersey.
The $3 billion in total penalties will be divided between the Justice Department, U.S. banking regulators, and the Treasury Department’s Financial Crimes Enforcement Network.
Along with the financial penalties, TD Bank will face independent oversight. The settlement also restricts TD from opening new branches or entering fresh markets without obtaining prior approval from the Office of the Comptroller of the Currency, regulators noted.
Cormark Securities analyst Lemar Persaud, commenting before the plea agreement was finalized, said an asset cap represents a “worst-case scenario” for TD. The bank had already set aside $3 billion to cover the fine.
Persaud compared the situation to Wells Fargo, which has been constrained by a $1.95 trillion asset cap since its fake accounts scandal. While such a cap will impact TD’s earnings, it’s expected to be less damaging than the effect on Wells Fargo, according to Persaud.
The ongoing investigation into TD Bank has contributed to its stock’s significant underperformance and likely influenced the upcoming retirement of CEO Bharat Masrani, Persaud added.
TD Bank, Canada’s second-largest lender and the 10th biggest bank in the U.S., first disclosed its cooperation with regulators and law enforcement last year, shortly after it abandoned a $13 billion deal to acquire regional lender First Horizon.
Federal authorities launched an investigation into TD’s internal operations after learning that a Chinese criminal organization had bribed bank employees, bringing large amounts of cash into its branches to launder millions of dollars from fentanyl sales in New York and New Jersey, a source confirmed.
In response, TD has spent millions bolstering its compliance measures, dismissed dozens of staff members from its U.S. branches, and appointed Ray Chun, head of its Canadian personal banking division, as its new CEO, distancing the bank’s leadership from the scandal.
CEO Masrani, who has led the bank for nearly a decade and previously oversaw its U.S. operations, will step down next year. He has taken full responsibility for the money laundering failures that have tarnished the bank’s reputation.
TD has already begun addressing the issues and has reclaimed compensation from executives, with authorities noting that the bank is the first to agree to such measures proactively.
{Matzav.com}