Today comes a tale of caution to banks and various lenders across the country that choose profits over compliance.
TD Bank made history last Thursday by becoming the largest bank in the United States to plead guilty to violations of the Bank Secrecy Act (BSA) and conspiracy to commit money laundering, enabling drug traffickers and other criminals to open accounts and transfer money through the bank. The bank and parent company TD Bank US Holding Company have agreed to pay more than $3 billion in fines to resolve the charges.
TD Bank, the 10th-largest in the US and second-largest in Canada, failed to maintain an anti-money laundering (AML) program that complies with the BSA and failed to file accurate Currency Transaction Reports (CTRs), according to the Office of Public Affairs press release.
In failing to do so, the Department of Justice (DOJ) officials said they fined the bank for every day it failed to comply with the BSA between 2014 and 2023, totaling a $1.4 billion fine.
The bank also owes a record $1.3 billion to the Treasury Department's Financial Crimes Enforcement Network, $450 million to the OCC, and another $123.5 million to the Federal Reserve. The bank had already set aside $3 billion to cover fines.
"We will make the necessary changes to put the bank on a stronger foundation," incoming CEO Ray Chun told investors on a conference call on Thursday. "This is TD's number-one priority and my number-one priority. Make no mistake, we will meet our commitments to our regulators... we will get the job done."
The U.S. Department of Justice and banking regulators dished out a scathing indictment of TD Bank that involves moving money for drug cartels and criminal organizations. The information document from the Justice Department states that TD’s failures created vulnerabilities that allowed five Bank store employees to open and maintain accounts for one of the money laundering networks. In doing so, the employees permitted the criminals to launder $39 million to Colombia.
“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.
The Justice Department said the bank allowed at least three different money laundering networks to move a total of $670 million through TD Bank accounts spanning back to 2014.
"TD Bank chose profits over compliance in order to keep its costs down," U.S. Attorney General Merrick Garland said at the Thursday press conference. “TD Bank created an environment that allowed financial crime to flourish. By making its services convenient for criminals, it became one.”
Authorities said TD Bank's issues were “known at every level” of the bank, and they did not flag suspicious activity until law enforcement raised attention to it. At times, bank tellers accepted gift cards as bribes.
Garland also told reporters that bank employees "openly joked" about the lack of compliance on multiple occasions, and at least two employees accepted bribes, the officials said.
The plea deal includes a rare imposition of an asset cap — a "worst-case scenario" said Cormark Securities analyst Lemar Persaud before the deal was announced. The plea deal also includes other business limitations due to multiple government investigations into what authorities described as pervasive issues.
Wells Fargo has had its earnings constrained by a $1.95 trillion asset cap in 2018, following a fake accounts scandal. An asset cap would also constrain TD's profits, but to a lesser extent than it did for Wells Fargo, Persaud said.
