TD Bank could face billions in fines following money-laundering probe

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Canada’s TD Bank may be facing billions of dollars in fines as Canadian and American regulators crack down on money-laundering schemes that came to light over the past year. 

National Bank analyst Gabriel Dechaine said total penalties for money-laundering allegations could easily hit $2 billion, according to a note issued to clients, while non-monetary penalties are expected to impact the bank’s operations for years. 

TD is not alone in its potential involvement with money laundering, as CIBC and RBC have also recently been fined by Canada’s financial crime regulator for failing to comply with anti-money laundering measures. But while the banks will always be at risk of unknowingly facilitating organized crime, experts say they could be doing more to prevent it. 

“It comes down to training and hiring the right people,” said Stephen Scott, a Calgary-based anti-money-laundering compliance and investigations consultant. “It takes one person per branch really to do (illegal) transactions.” 

Currently, the U.S. Justice Department is investigating how Chinese drug traffickers allegedly used TD and other banks to launder at least $653 million (U.S.) in proceeds from fentanyl sales, including by bribing the bank’s employees to do so, the Wall Street Journal reported

The money-laundering probes first became public last spring after it was found that U.S. regulators barred the sale of First Horizon Bank to TD over concerns of suspicious customer transactions. Since then, TD has been generally quiet about the status of the investigations, until it announced in late April that it had set aside $450 million (U.S.) in provisions for possible penalties imposed by U.S. regulators. 

Last week, Fintrac, Canada’s financial-crime watchdog, also issued a penalty against TD — this one amounting to $9.2 million — for failing to comply with anti-money-laundering and terrorist financing measures. Among the violations, according to Fintrac, was that the bank did not report suspicious transactions that it had reason to believe were tied to illicit activity. TD has already paid the fine in full, according to Fintrac’s statement on Thursday. 

(Fintrac also levied $1.3 million and $7.4 million penalties against CIBC and RBC, respectively, for non-compliance at the end of last year). 

TD said a “comprehensive overhaul” of its AML program is ongoing, with $500 million already spent in remediation and platform enhancements. 

“Criminals relentlessly target financial institutions to launder money and TD has a responsibility and an obligation to thwart their illegal activity,” Bharat Masrani, CEO of TD, said in a statement on Friday. “I regret that there were serious instances where the Bank’s AML program fell short and did not effectively monitor, detect, report or respond.”

A recent Star investigation revealed how criminals like Italy’s ’Ndrangheta mafia have reportedly been taking advantage of Canada’s largest banks. The stories usually have one factor in common: a corrupted insider. 

“Whether they coerce somebody that was already working there, whether they planted somebody in the banking system, we don’t know, but, as I said, the scale of this operation suggests that they must have had inside help,” Richard Powers, professor at the Rotman School of Management at the University of Toronto, said in relation to TD’s involvement in the fentanyl trafficking investigation. 

Scott believes the banks could be doing more to understand criminality, rather than just worrying about “checking boxes” to comply with regulators. 

This article was originally sourced from