5. GENDER EQUALITY

Feds, TD Bank reach $3B resolution in money laundering case

Written by Amanda
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Federal authorities announced a $3 billion settlement with TD Bank to resolve an investigation into alleged money laundering violations.

TD Bank pleaded guilty before Judge Esther Salas in Newark federal court Oct. 10 to conspiring to fail to maintain an anti-money laundering (AML) program that complies with the Bank Secrecy Act (BSA); failing to file accurate Currency Transaction Reports; and laundering money. With its U.S. headquarters in Cherry Hill, TD is the nation’s 10th largest bank.

According to prosecutors and court documents, between January 2014 and October 2023, TD Bank had “long-term, pervasive, and systemic deficiencies” in its U.S. AML polices, procedures and controls — but “failed to take appropriate remedial action.”

“Instead, senior executives at TD Bank enforced a budget mandate, referred to internally as a ‘flat cost paradigm,’ requiring that TD Bank’s budget not increase year-over-year, despite its profits and risk profile increasing significantly over the same period,” prosecutors alleged. “Although TD Bank maintained elements of an AML program that appeared adequate on paper, fundamental, widespread flaws in its AML program made TD Bank an ‘easy target’ for perpetrators of financial crime.”

Prosecutors alleged that despite warnings from federal regulators and TD Bank’s own internal audit group, the bank’s transaction monitoring program remained “‘effectively static” from 2014 through 2022. Additionally, they allege it did not adapt to address known, glaring deficiencies; emerging money laundering risks; or TD Bank’s new products and services.

“Throughout this time, TD Bank intentionally did not automatically monitor all domestic automated clearinghouse (ACH) transactions, most check activity, and numerous other transaction types, resulting in 92% of total transaction volume going unmonitored from Jan. 1, 2018, to April 12, 2024,” according to court documents. “This amounted to approximately $18.3 trillion of transaction activity.”

‘Convenient’ for criminals

In the words of TD Bank’s employees, its AML failures made it “convenient” for criminals.

“These failures enabled three money laundering networks to collectively transfer more than $670 million through TD Bank accounts between 2019 and 2023,” according to prosecutors. “Between January 2018 and February 2021, one money laundering network processed more than $470 million through the bank through large cash deposits into nominee accounts. The operators of this scheme provided employees gift cards worth more than $57,000 to ensure employees would continue to process their transactions.”

Under the settlement agreement:

  • TD Bank will pay more than $3 billion in penalties, including over $1.8 billion to the Justice Department and a record $1.3 billion penalty to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN)
  • The bank will remediate its U.S. AML program as well as prioritize the funding and staffing of the remediation; a monitorship will provide formal oversight of the process
  • Total assets at TD’s two U.S. banking subsidiaries will be capped at $434 billion
  • TD’s U.S. bank will be subject to more stringent approval processes for new bank products, services, markets and stores to ensure the AML risk is “appropriately considered and mitigated”

 

Garland

“By making its services convenient for criminals, TD Bank became one,” said Attorney General Merrick Garland. “Today, TD Bank also became the largest bank in U.S. 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.”

‘Fertile ground’ for illicit activity

U.S. Attorney for New Jersey Philip Sellinger said that TD Bank prioritized growth and convenience over following its legal obligations.

Sellinger

“As a result of staggering and pervasive failures in oversight, it willfully failed to monitor trillions of dollars of transactions – including those involving ACH transactions, checks, high-risk countries, and peer-to-peer transactions – which allowed hundreds of millions of dollars from money laundering networks to flow through the bank, including for international drug traffickers,” said Sellinger. “The bank was aware of these risks and failed to take steps to protect against them, including for two networks prosecuted in New Jersey and elsewhere – one that dumped piles of cash on the bank’s counters and another that allegedly withdrew amounts from ATMs 40 to 50 times higher than the daily limit for personal accounts.”

“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 systems,” 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.”

Full responsibility

In a statement, TD Bank laid out next steps and actions – committing to addressing and remediating the situation.

“We have taken full responsibility for the failures of our U.S. AML program and are making the investments, changes and enhancements required to deliver on our commitments,” said Bharat Masrani, group president and CEO, TD Bank Group. “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 shareholders.”

We have taken full responsibility for the failures of our U.S. AML program and are making the investments, changes and enhancements required to deliver on our commitments.
Bharat Masrani, group president and CEO, TD Bank Group

“Money laundering is a serious global threat, and our U.S. 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,” said Alan MacGibbon, chair of the Board, TD Bank Group. “We have appointed new leader across our U.S. operations, overhauled our U.S. AML team, and prioritized investments to drive the required changes.”

“Criminals were able to exploit our systems, and our U.S. AML program did not deliver,” said Leo Salom, president and CEO, TD Bank. “We continue to work with purpose, focus, and urgency to remediate our AML program and earn back the trust of our regulators and other stakeholders. We are committed to working productively with the Monitorship to build a sustainable AML program and meet our obligations under the terms of the resolution.”

Source: njbiz.com

About the author

Amanda

Hi there, I am Amanda and I work as an editor at impactinvesting.ai;  if you are interested in my services, please reach me at amanda.impactinvesting.ai