AG: Major Canadian Bank Became a Criminal in the US

Canada's second-largest bank "created an environment that allowed financial crime to flourish," Attorney General Merrick Garland said Thursday. "By making its services convenient for criminals, it became one." TD Bank has been fined more than $3 billion after becoming the first bank in the US to plead guilty to conspiracy to commit money laundering, the Globe and Mail reports.

• The bank of choice for criminals. Federal authorities say TD Bank's lax practices between 2014 and 2023 made it the bank of choice for criminals, with one customer moving $470 million in funds including drug proceeds through the bank's branches, the AP reports. The man, who bribed employees with $57,000 in gift cards, repeatedly deposited more than $1 million in cash in a single day.
• "Fertile ground" for illicit activity. "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.

• Compliance program "starved." Authorities say the bank "starved" its compliance program of investment as it grew to become the tenth-largest bank in the US, the BBC reports. They say that by 2018, more than 90% of transactions on its network were not monitored. "TD Bank chose profits over compliance, in order to keep its costs down," Garland said. "That decision is now costing the bank billions of dollars in criminal and civil penalties."
• Managers joked about money laundering. Managers not only turned a blind eye to money laundering, they joked about it, the New York Times reports. "You guys really need to shut this down LOL," a manager wrote to a colleague in 2020, referring to a customer in New York who pleaded guilty to his role in a $653 million money laundering conspiracy two years later. In another exchange, a compliance employee asked a colleague why "all the really awful ones bank here lol." The colleague responded, "Because … we are convenient," a reference to TD Bank's "America's Most Convenient Bank" slogan.
• A "worst-case" penalty. The bank's settlement with US authorities includes penalties that will force it to restructure its business. It includes an asset cap, which will prevent it from growing larger than its current size, the Times reports. Analysts had seen an asset cap "as a worst-case scenario and an unlikely penalty," the Globe and Mail reports. The bank will also face restrictions on opening new branches and launching new products.
• A "transition year" lies ahead. "We think of 2025 as a transition year. We're going to use the year to be able to make the significant moves ... to be able to comply with the asset cap," Leo Salom, the head of TD Bank's US business, said Thursday, per Reuters. CEO Bharat Masrani, who said Thursday that he takes "full responsibility" for the failures that occurred under his watch, plans to retire next year.

(More Toronto Dominion Bank stories.)