TD Bank has agreed to pay $3 billion to settle allegations that it failed to adequately monitor money laundering activities by drug cartels, regulators announced on Thursday.
This settlement includes a record $1.3 billion fine to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), with an additional $1.8 billion to be paid to the U.S. Justice Department. The bank will also plead guilty to charges of violating the Bank Secrecy Act.
The U.S. Department of Justice criticized TD Bank for “long-term, pervasive, and systemic deficiencies” in its transaction monitoring processes.
Attorney General Merrick Garland stated that by making its services accessible to criminals, the bank itself became complicit in criminal activities.
According to a legal filing, more than 90% of TD Bank’s transactions went unmonitored between January 2018 and April 2024, allowing three money laundering networks to funnel over $670 million through the bank.
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In one instance, TD employees were reportedly given $57,000 in gift cards to ignore suspicious cash deposits totaling $470 million.
Deputy Treasury Secretary Wally Adeyemo emphasized the harm caused by these failures, stating that TD Bank “enabled drug trafficking” by prioritizing profit over legal compliance.
In a related statement, the Office of the Comptroller of the Currency (OCC) noted that TD Bank processed hundreds of millions of dollars in transactions marked by clear signs of suspicious activity.
TD Bank’s CEO, Bharat Masrani, acknowledged the failures, apologizing for what he called a “difficult chapter” in the bank’s history. He pledged to make the necessary changes to address these shortcomings.
TD Bank has announced that it will enhance its anti-money laundering efforts by hiring over 700 new specialists and deploying new processes to detect and prevent financial crimes.
The bank will be subject to four years of monitoring by FinCEN to ensure compliance with the settlement terms.
The OCC also imposed growth restrictions on TD Bank’s U.S. operations, an extraordinary measure that mirrors sanctions placed on Wells Fargo in 2018 after its own scandals.
The Federal Reserve further penalized TD Bank by requiring it to relocate its anti-money laundering compliance office to the U.S.
The penalties stunned investors, leading to a 6% drop in TD Bank’s U.S.-listed shares. The bank expects a one-time charge of $1.5 billion after taxes and plans to reduce its assets by 10% to cover the fine.
Officials at the Justice and Treasury departments have raised concerns about Mexican cartels using the U.S. banking system to launder proceeds from fentanyl and other drugs.
This issue has prompted increased collaboration between government agencies and financial institutions to address the growing threat.
However, critics, including Senator Elizabeth Warren, argue that the penalties don’t go far enough, accusing regulators of letting bank executives off the hook. Warren called for stronger enforcement of anti-money laundering laws, stating that large banks treat fines as merely a cost of doing business.
This settlement follows a previous $1.2 billion payment by TD Bank in a lawsuit related to its involvement in financier Allen Stanford’s $7 billion Ponzi scheme, although the bank denied any wrongdoing in that case.