TD Bank Hit with Historic $3.09 Billion Fine for Money Laundering, Including Drug Cartel Ties

In a significant regulatory blow, Toronto-Dominion Bank (TD Bank) has pleaded guilty to multiple charges, including conspiracy to violate the Bank Secrecy Act and commit money laundering. The bank is now liable for a staggering US$3.09 billion in fines from U.S. regulators, marking it as the largest financial penalty of its kind in U.S. history.

The repercussions extend beyond financial penalties, as the Office of the Comptroller of the Currency (OCC) has issued a cease-and-desist order alongside non-financial sanctions. These include an asset cap that will restrict TD Bank’s growth within the U.S. market, following findings of “significant, systemic breakdowns” in its transaction monitoring program.

U.S. Attorney General Merrick Garland stated that TD Bank fostered an environment conducive to financial crimes. “By making its services convenient for criminals, it became one,” he remarked during a press conference on Thursday. TD Bank’s plea agreement revealed it allowed three money-laundering networks to transfer over $670 million through its accounts over six years, a fact known to many employees yet overlooked.

Among the grave allegations, one money-laundering operation involved five TD Bank employees facilitating the laundering of drug money. The severe penalties stem from a coordinated effort among multiple regulatory bodies, including the OCC and the U.S. Department of Justice (DOJ), with the total fines surpassing $3 billion.

As part of the settlement, TD Bank has agreed to pay over $1.8 billion to the DOJ for its criminal charges. Bharat Masrani, the bank’s CEO, acknowledged the severity of the situation, stating, “We have taken full responsibility and will make the investments, changes, and enhancements required to deliver on our commitments.”

For years, the DOJ has claimed that TD Bank “willfully” neglected its transaction monitoring, leading to massive illegal fund transfers. U.S. Attorney Philip R. Sellinger highlighted that one laundering network “dumped piles of cash on the bank’s counters,” while another withdrew amounts far exceeding daily limits for personal accounts.

One notable case involved an employee named “David,” who allegedly transferred over $470 million in illicit funds through TD Bank branches. This employee, who has already pled guilty to laundering drug proceeds, identified TD Bank as having the most lenient policies, making it his preferred venue for laundering money. On one occasion, he deposited more than $1 million in cash in a single day and facilitated fund movement through official cheques and wire transfers, even distributing more than $57,000 in gift cards as bribes to fellow employees.

Concerns about TD Bank’s transaction monitoring were raised repeatedly by its internal audit group from 2014 to 2022, but significant changes were not implemented. The DOJ indicated that five TD Bank employees issued dozens of ATM cards to money-launderers, aiding in the laundering of around $39 million. So far, over two dozen individuals, including two bank employees, have been charged in connection with these schemes.

To address these failures, TD Bank has agreed to undertake a major restructuring of its anti-money-laundering program, which includes a three-year monitoring period and five years of probation. Any new programs or services in U.S. branches will now undergo more stringent approval processes mandated by the OCC.

While the asset cap imposed by the OCC will not affect TD Bank’s operations in Canada or other countries, it will significantly restrict growth opportunities within the U.S., where TD ranks as the 10th largest bank. As part of the bank’s leadership transition, Raymond Chun is set to replace Masrani upon his retirement next year. In a call with investors, Masrani reiterated the bank’s commitment to improvement, stating, “We should have done better. We know what the issues are, and we are fixing them as we move forward.”