TD Bank pleads guilty and pays $3 billion to settle money laundering case

TD Bank agreed to pay nearly $3 billion in fines to U.S. authorities and pleaded guilty Thursday to money-laundering-related charges in a case brought by federal prosecutors, who said the Canadian bank “facilitated” criminals opening, transferring accounts. fund and even deposited seven-figure cash in its branches.

The combined fines are the largest ever imposed by US authorities on a bank for violating anti-money-laundering laws, and include an “asset cap” that prevents TD Bank from growing any larger than its current size.

A pair of federal indictments lay out how, for more than a decade, TD Bank employees took bribes and ignored apparent activity by criminal customers in Columbia and elsewhere.

In one example cited by authorities, a Queens man who previously pleaded guilty to several felonies gave bank employees more than $57,000 in gift cards in exchange for allowing more than $470 million in embezzlement.

Such behavior was somewhat of an open secret inside the bank, prosecutors said. “How is this not money laundering?” A branch employee asked another after allowing a customer to purchase more than $1 million in bank checks with cash.

“Oh, it's 100 percent,” the second employee responded, according to the complaint.

In another example, a branch manager emailed a colleague, “You really need to stop her LOL.” They didn't.

The asset cap, imposed by the Office of the Comptroller of the Currency, is considered the industry's toughest penalty because it prevents a bank from growing. TD Bank, with about $370 billion in assets, is the first major bank to face the rare move since Wells Fargo, which has been barred since 2018 for various misdeeds, including opening sham bank accounts without its customers' consent.

TD Bank pleaded guilty to charges of conspiracy to maintain an adequate money-laundering program and fail to file accurate transaction reports. Cynthia Adams, TD Bank's chief legal officer in the United States, entered the plea on behalf of the bank's US subsidiary in federal district court in Newark, before Judge Esther Salas.

In court documents, federal prosecutors said some of the bank's employees were able to launder money by the criminal ring and that the bank was slow to identify and address it. Prosecutors said they had charged more than two dozen people, including two bank insiders.

“TD Bank's continued prioritization of growth over regulation allowed its employees to break the law and facilitate the laundering of millions of dollars,” Acting Comptroller of the Currency Michael J. Hsu, said in a statement. “Imposing the asset cap will ensure that the bank focuses on building the right controls commensurate with its risk profile.”

The joint action included federal prosecutors in New Jersey and Washington, the Federal Reserve, the Office of the Comptroller of the Currency and other Treasury authorities.

“This is a sad day in our history, for which we deeply regret,” said TD Bank Chief Executive, Bharat Masrani. The bank announced last month that Mr Masrani would retire in April.

The bank's board chairman, Alan McGibbon, said in a statement that it would “continue to take action to address these failures and hold those responsible accountable.”

TD Bank Group — Canada's second-largest bank, with nearly 1,100 branches in the U.S. — disclosed last year that it was the subject of a U.S. Department of Justice investigation into its anti-money laundering compliance. In April, the bank reported that it was also in talks with three American banking regulators about penalties for failing to follow anti-money-laundering laws.

At the time, the bank kept $450 million in reserves for its expected penalties, but it warned investors that the final cost could be higher. In August, the bank set aside an additional $2.6 billion in reserves for its expected penalties. To raise that cash, TD Bank sold 40.5 million shares of Charles Schwab stock, reducing its ownership stake in the banking and brokerage company from 12 percent to just 10 percent.

Last year, TD Bank agreed to pay $1.2 billion to settle claims stemming from a $7 billion Ponzi scheme involving Stanford Financial, a bank that collapsed in 2009. TD Bank was accused of continuing to do business with Stanford despite clear red flags about its operations. Fraudulent certificates of deposit that Stanford sold to more than 20,000 customers.

The swirling probes thwarted TD Bank's planned acquisition of Memphis-based First Horizon Bank, a $13.4 billion takeover that was announced in early 2022 before being abandoned last year due to problems getting regulatory approval. TD Bank paid First Horizon a $200 million breakup fee.

TD Bank spent 500 million Canadian dollars (about $365 million) to improve its money laundering controls, Mr. Masrani said in May. Late last year, the bank hired Herb Mazaregos, formerly of Bank of Montreal, to run its global anti-money laundering program.

TD Bank's US branches stretch along the East Coast from Maine to Florida. It has many branches across Canada, where the bank is also known as Toronto-Dominion. It is the 10th largest bank in the United States, according to Federal Reserve data.

To settle, TD Bank agreed to hire an independent monitor to oversee its anti-money laundering efforts and invest more in the program overall.