Major Bank Admits to Violations, Set for Multibillion-Dollar Penalty and Reforms

TD Bank’s $3 billion settlement highlights significant lapses in anti-money laundering practices, leaving the bank with a daunting compliance overhaul.

At a Glance

TD Bank pleads guilty to Bank Secrecy Act violations, admitting to money laundering conspiracy.
The settlement includes a record $3 billion in fines and an extensive compliance overhaul.
An independent monitor will supervise TD Bank’s practices for three years.
The ruling signifies a tougher stance by U.S. authorities on banking compliance failures.

Major Violations and Penalties

TD Bank admitted to systemic failures in its anti-money laundering (AML) program, which led to significant breaches of the Bank Secrecy Act. The Justice Department’s investigation found that TD Bank failed to maintain adequate protocols to detect and report suspicious transactions, allowing over $670 million to be laundered through its systems. Employees reportedly ignored illicit activities due to a lack of resources and awareness within the compliance division.

The company’s compliance failures continued over several years, resulting in historic fines totaling $3 billion. This encompasses $1.43 billion in criminal fines and $452 million in forfeitures, emphasizing the severity of TD Bank’s transgressions. The penalties are considered the largest ever imposed under the Bank Secrecy Act, reflecting a significant shift in governmental accountability measures.

TD Bank Pleads Guilty to Bank Secrecy Act and Money Laundering Conspiracy Violations in $1.8B Resolution

🔗: https://t.co/5rUnbtlJSh pic.twitter.com/MTQvB2Wwiw

— U.S. Department of Justice (@TheJusticeDept) October 10, 2024

Compliance Overhaul and Oversight

TD Bank’s plea agreement stipulates the implementation of substantial compliance updates, overseen by an independent monitor for three years. The bank must amend its AML policies, staffing levels, and processes to meet rigorous standards. The Financial Crimes Enforcement Network (FinCEN) has also imposed a four-year independent monitorship to ensure adherence to updated protocols.

“For years, TD Bank starved its compliance program of the resources needed to obey the law. Today’s historic guilty plea, including the largest penalty ever imposed under the Bank Secrecy Act, offers an unmistakable lesson: crime doesn’t pay — and neither does flouting compliance.” – Deputy Attorney General Lisa Monaco

The Justice Department credited TD Bank’s partial cooperation despite not voluntarily disclosing its wrongdoing. The investigation involved multiple U.S. agencies, including the IRS Criminal Investigation and the Drug Enforcement Administration. These measures signal a comprehensive effort to ensure TD Bank cooperates fully with future federal scrutiny.

From combatting drug trafficking to terrorist financing, @USTreasury uses our tools to help protect our financial system. Our actions today reflect our commitment to safeguarding our national security and financial system. https://t.co/HUo7DasW84

— Acting Under Secretary Brad Smith (@UnderSecTFI) October 10, 2024

Impact on TD Bank

The bank’s leaders acknowledged the significant compliance failures and committed to rectifying the situation. TD Bank CEO Bharat Masrani has promised to implement changes to meet compliance expectations. The plea deal prohibits TD Bank from expanding beyond its current size, effectively imposing an “asset cap” as further consequence.

“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.” – TD Bank Group CEO Bharat Masrani

The market’s response to the settlement was swift, with TD Bank’s shares falling more than 5% following the announcement. The bank’s public and internal image has been tarnished by the revelations in the case. The case highlights the necessity for rigorous compliance measures across financial institutions, underscored by TD Bank’s massive penalties and restricted business growth potential.