TD Bank Fined a Record $3 Billion for Cartel Money Laundering

"Socalj" for Borderland Beat

From a CNN Article

TD Bank will pay $3 billion to settle charges that it failed to properly monitor money laundering by drug cartels, regulators announced Thursday.

The fine includes a $1.3 billion penalty that will be paid to the US Treasury Department’s Financial Crimes Enforcement Network, a record fine for a bank. TD also intends to pay $1.8 billion to the US Justice Department and plead guilty to resolve the US government’s investigation that the bank violated of the Bank Secrecy Act and allowed money laundering.

The US Department of Justice said in a statement that TD Bank had “long-term, pervasive, and systemic deficiencies” in its procedures of monitoring transactions.

“By making its services convenient for criminals, it became one,” said Attorney General Merrick Garland, at a press conference Thursday.

More than 90% of transactions went unmonitored between January 2018 to April 2024, which “enabled three money laundering networks to collectively transfer more than $670 million through TD Bank accounts,” according to a legal filing.

“I want to be clear, these systemic failures did not just create hypothetical vulnerabilities, but they resulted in actual, material harm to American citizens and communities,” Deputy Treasury Secretary Wally Adeyemo said in a statement. “Time and again, unlike its peers, TD Bank prioritized growth and profit over complying with the law. The bank enabled drug trafficking.”

In one instance, TD Bank employees collected more than $57,000 worth of gift cards to process more than $470 million in cash deposits from a money laundering network to “ensure employees would continue to process their transactions” and not declare them in required reports, the DoJ said.

In a related statement, the Office of the Comptroller of the Currency (OCC), a US agency that regulates banks, said TD processed hundreds of millions of dollars of transactions the clearly indicated highly suspicious activity.

“This is a difficult chapter in our bank’s history,” TD Bank CEO Bharat Masrani in a statement. “These failures took place on my watch as CEO and I apologize to all our stakeholders.”

“We have taken full responsibility for the failures of our US [anti-money laundering] program and are making the investments, changes and enhancements required to deliver on our commitments,” Masrani added.

TD is ramping up its anti-money laundering surveillance efforts, including the hiring of more than 700 new specialists with “experience and qualifications in money laundering prevention, financial crimes, and AML remediation,” as well deploying new processes to “better prevent, detect and measure financial crime risk,” the bank said.

The Canadian bank will be subject to four years of monitoring by FinCEN to observe the lender more closely and ensure it is following the agreement. The US Federal Reserve also fined TD Bank and will force the company to relocate to the United States its anti-money laundering compliance office.

And, in a significant part of the agreement, the OCC is restricting TD Bank’s growth in the United States. Although extraordinary, it is not unprecedented for a bank to be monitored and its growth restricted by the US government. Wells Fargo was saddled with similar restrictions on growth and a hefty fine for “widespread consumer abuses” in 2018 and has yet to convince regulators to remove that asset cap. Wells Fargo previously admitted that its workers responded to wildly unrealistic sales goals by creating as many as 3.5 million fake accounts.

The tough penalties from regulators on Thursday caught Wall Street off guard. TD Bank’s (TD) US-listed shares slumped 6% as investors brace for higher legal expenses and weaker growth.

TD ensured that it has adequate liquidity to pay the fine and continue operations. In a call with analysts, the bank said it expects a one-time charge of $1.5 billion after taxes and will reduce 10% of its assets to address the massive fine.

“We believe that the market was becoming increasingly comfortable with the thought that there would not be any growth restrictions placed on TD,” John Aiken, analyst at Jefferies, wrote in a note to clients on Thursday. “TD will need to find a new avenue for growth from its traditional reliance on US retail banking.”

TD Bank Money Laundering

First, over the course of a three-year period, a person who TD Bank employees knew as David moved over $470 million in illicit funds through TD Bank branches in the United States.

David has separately pled guilty to laundering drug proceeds through the bank.

David had attempted to launder money through numerous financial institutions. But he found that TD Bank had the most permissive policies and procedures and chose to launder most of his funds there.

He also bribed TD Bank employees with more than $57,000 in gift cards in furtherance of his scheme.

David’s illegal conduct was obvious, to say the least. On more than one occasion, he deposited more than $1 million in cash in a single day. He then immediately moved the funds out of the bank using official bank checks and wire transfers.

TD Bank employees at many levels understood and acknowledged the likely illegality of David’s activity.

In August 2020, one TD Bank store manager emailed another store manager and remarked, “You guys really need to shut this down LOL.”

In late 2020, another store manager implored his supervisors — several TD Bank regional managers — to act, noting that “[i]t is getting out of hand and my tellers are at the point that they don’t feel comfortable handling these transactions.”

In February 2021, one TD Bank store employee saw that David’s network had purchased more than $1 million in official bank checks with cash in a single day. The employee asked: “How is that not money laundering.” A back-office employee responded, “oh it 100% is.”

In a second, separate money laundering scheme, five TD Bank employees conspired with criminal organizations to open and maintain accounts at the bank that were used to launder $39 million to Colombia, including drug proceeds.

That money laundering organization reused the same Venezuelan passports to open multiple accounts at TD Bank. It sometimes used the same passport to obtain multiple debit cards for a single account.

Despite significant internal red flags, the bank did not identify that its own employees were conspiring to launder tens of millions of dollars to Colombia, until law enforcement arrested one of them.

In yet a third scheme, outlined in today’s charges, a money laundering network maintained accounts at TD Bank for at least five shell companies. It used those accounts to move over $100 million in illicit funds through the bank.

Even though retail employees flagged suspicious activity connected to those accounts, the bank did not file a suspicious activity report until law enforcement alerted the bank to the money laundering network’s activity. By that time, the accounts had been open for over 13 months and had been used to transfer nearly $120 million.

On multiple occasions, bank employees openly joked about the bank’s enabling of criminal activity.

In one instance a compliance employee asked a manager what “the bad guys” thought about the bank. The manager replied: “Lol. Easy target.”

Other employees consistently joked on the bank’s instant messaging platform about the bank’s motto, “America’s Most Convenient Bank.” They linked it to the bank’s approach to combating money laundering.

For example, a compliance employee asked a colleague why “all the really awful ones bank here lol.”

The colleague replied: “because … we are convenient.”

There is nothing wrong with a bank that tries to make its services convenient for its honest customers.

But there is something terribly wrong with a bank that knowingly makes its services convenient for criminals.

The Bank Secrecy Act requires financial institutions like TD Bank to establish and maintain compliance programs that guard against money laundering.

But TD Bank chose profits over compliance, in order to keep its costs down.

That decision is now costing the bank billions of dollars in criminal and civil penalties.

Less than a year ago, the Justice Department secured felony guilty pleas from Binance, the world’s largest cryptocurrency exchange, and from its founder and CEO. We also obtained one of the largest corporate penalties in U.S. history.

Because of the seriousness of the accusations, some critics, including Democratic Massachusetts Senator Elizabeth Warren, said the penalties didn’t go far enough.

“Big banks treat government fines as the cost of doing business,” Warren said in a statement. “This settlement lets bad bank executives off the hook for allowing TD Bank to be used as a criminal slush fund. The Department of Justice and the Office of the Comptroller of the Currency need to do better in enforcing our anti-money laundering laws.”

Last year, TD Bank paid $1.2 billion to settle a lawsuit alleging its involvement in an infamous $7 billion Ponzi scheme orchestrated by disgraced financier Allen Stanford more than a decade ago. The money was used to pay back victims of the scheme but the bank denied any wrongdoing.

Sources WSJ, CNN, DOJ

Categories: Money Laundering