TD Bank has agreed to pay US$3 billion in fines and penalties for failing to maintain an anti-money laundering program and became the first bank in U.S. history to plead guilty to conspiracy to commit money laundering. The bank’s failure to maintain its anti-money laundering program allowed corrupt employees to facilitate the laundering of tens of millions of dollars. The financial penalties together with an asset cap imposed by the Office of the Comptroller of the Currency as part of a plea agreement caused the bank’s share price to tumble in Canada and the United States.

1. Introduction

On October 10, 2024, TD Bank N.A. (TDBNA) and its parent company TD Bank US Holding Company (TDBUSH) agreed to pay about US$1.8 billion in penalties to resolve an investigation by the United States Department of Justice into money laundering and violations of the Bank Secrecy Act (BSA). TDBNA pleaded guilty to a conspiracy to willfully fail to maintain an appropriate anti-money laundering program that complies with the BSA; knowingly fail to file accurate Currency Transaction Reports; and, launder monetary instruments. TDBUSH pleaded guilty to causing TDBNA to fail to maintain an anti-money laundering program that complies with the BSA and to fail to file accurate Currency Transaction Reports. The government had alleged in two separate Informations that, between January 2014 and October 2023, the bank “willfully failed to remediate persistent, pervasive and known deficiencies” in its anti-money laundering program. (here and here) The failures enabled money laundering networks to launder over $600 million in illegal proceeds between 2019 and 2023 and created vulnerabilities that allowed five bank employees to open and maintain accounts for one of the money laundering networks. Although the bank maintained elements of an anti-money laundering program that appeared adequate on paper, the justice department asserted that “fundamental, widespread flaws in [the] program made TD Bank an ‘easy target’ for perpetrators of financial crime.” (here)

2. Background

Headquartered in Cherry Hill, New Jersey, TD Bank N.A. is the tenth largest bank in the United States with over 1,100 branches on the east coast. It offers banking products and services to over ten million individual and commercial customers in the U.S. TD Bank US Holding Company, the direct parent of TD Bank N.A., has oversight of the bank’s anti-money laundering compliance program and is accountable for monitoring the effectiveness of the bank’s program under the Bank Secrecy Act. TD Bank US Holding Company in turn is the wholly owned subsidiary of TD Group US Holdings LLC  which is a wholly owned subsidiary of the Toronto-Dominion Bank (TD Bank Group), an international banking and financial services corporation based in Canada. TD Bank Group is the ultimate parent bank of all TD operations. During the relevant period TD Bank N.A. monitored only about 8% of the volume of transactions “because it omitted all domestic automated clearinghouse (“ACH”) transactions, most check [sic] activity, and numerous other transaction types from its automated transaction monitoring system.” Due to this failure, the bank did not monitor approximately $18.3 trillion in activity between January 1, 2018, through April 12, 2024. Senior executives prioritized “customer experience” over anti-money laundering compliance and enforced a “flat cost paradigm” that set expectations that all budgets, including the anti-money laundering budget, would not increase year-over-year.

3. Three Money Laundering Schemes

I will give you the following extracts from the Information charging TD Bank US Holding Company that alleged three specific money laundering schemes:

• [T]he Defendants willfully failed to file accurate [Currency Transaction Reports] related to one of these three money laundering schemes. Da Ying Sze, a/k/a David (“David”), used TDBNA in furtherance of a money laundering and unlicensed money transmitting scheme for which he ultimately pled guilty in 2022. David conspired to launder and transmit over $653 million, of which more than $470 million was laundered through the Bank. David bribed Bank employees with more than $57,000 in gift cards in furtherance of the scheme. David laundered money through the Bank by depositing large amounts of cash – occasionally in excess of one million dollars in a single day – into accounts opened by other individuals and by requesting that Bank employees send wires and issue official checks [sic]. TDBNA failed to identify David as the conductor of transactions in over 500 of the CTRs the Bank filed for his transactions, totaling over $400 million in transaction value, despite David entering TDBNA [branches] with nominee account holders and conducting transactions directly by making large cash deposits into accounts he purportedly did not control.
• […] TDBNA employed five individuals who provided material assistance, often in return for a fee, to a second money laundering scheme, which involved laundering tens of millions of dollars from the United States to Columbia. [TDBNA insiders] opened accounts and provided dozens of ATM cards to the money laundering networks, which these networks used to launder funds from the United States to Columbia through high volume ATM withdrawals. The insiders assisted with maintaining accounts by issuing new ATM cards and resolving internal controls and roadblocks, including freezes on certain account activity. Through the accounts the insiders opened, the money laundering networks laundered approximately $39 million through the Bank. Despite significant internal red flags, the Defendants did not identify the role the insiders played in the money laundering activity until law enforcement arrested [an insider] in October 2023.
• From March 2021 through March 2023, another money laundering organization that purported to be involved in the wholesale diamond, gold, and jewelry business […] maintained accounts for at least five shell companies at TDBNA and used those accounts to move approximately $123 million in illicit funds through the Bank. Since their accounts openings in 2021, TDBNA knew that theses shell companies were connected because they shared the same account signatories. Despite these red flags, TDBNA did not file a Suspicious Activity Report […] until law enforcement alerted TDBNA […] in April 2022. By that time, [the] accounts had been open for over 13 months and had been used to transfer nearly $120 million through TDBNA.

In announcing the plea agreements (here and here), U.S. Attorney General Merrick Garland said TD Bank “became the largest bank in U.S. history to plead guilty to Bank Secrecy Act program failures” and “the first U.S. bank in history to plead guilty to conspiracy to commit money laundering.”

4. The Fallout

In an article titled TD Bank Pleads Guilty and Pays $3 Billion to Settle Money-Laundering Case published by The New York Times on October 10, 2024, Stacy Cowley, Matthew Goldstein and Rob Copeland said TD Bank Group had disclosed last year that it was the subject of a probe by the U.S. justice department into its “anti-money-laundering compliance” and was in discussions with regulators about “penalties for failing to follow anti-money-laundering laws.” (here) The bank set aside $450 million in reserve for fines it anticipated and later put an additional $2.6 billion in reserve. As part of the plea agreement, TD Bank agreed to forfeit $452,432,302.00 and pay a criminal fine of $1,434,513,478.40 for a total financial penalty of $1,886,945,780.40. The bank also agreed to retain an independent compliance monitor for three years to oversee its compliance remediation and enhancement. The bank has also received a cease and desist order and non-financial sanctions from the Office of the Comptroller of the Currency including an asset cap that puts limits on its growth in the United States. The asset cap does not apply to the bank’s business in Canada or other countries. (here) The bank’s share price tumbled more than 5% on the Toronto Stock Exchange after news of the penalties broke. (here) Last year, TD Bank agreed to pay $1.2 billion to settle claims arising from a $7 billion Ponzi scheme involving Stanford Financial, a bank that collapsed in 2009. (here and here)

5. Conclusion

You may have wondered about the difference in the numbers. The headline in The Times put the fine at $3 billion whereas Attorney General Garland said the total financial penalty is $1.8 billion. It appears the numbers break down this way. The total financial penalty includes US$1.3 billion that will be paid to the U.S. Treasury Department’s Financial Crimes Enforcement Network. The bank will also pay US$1.8 billion to the U.S. Department of Justice. (here) The asset cap is not unprecedented as similar growth restrictions were imposed on Wells Fargo for “widespread consumer abuses” in 2018 and it has not yet convinced regulators to remove the cap.