On 2nd May, the Wall Street Journal (WSJ) reported that Canada’s TD Bank is being probed in a money laundering case. Following the report, the stock price of the Bank dropped by 1%. As per the report, the Justice Department was investigating the bank’s finances and the focus of the investigation into the bank’s internal controls was on how the crime groups from China and drug traffickers used the bank to launder money from the sale of fentanyl in the US.
The investigation into the bank’s operations was initiated after investigating agencies uncovered an operation in New Jersey and New York, where hundreds of millions of dollars were laundered via TD and other banks. This money was earned by the drug traffickers from the sale of illicit narcotics. Prosecutors alleged that TD employees received bribes from the criminals.
In the past couple of decades, TD has become one of the largest regional banks in the US with a series of acquisitions of other financial institutions. In early 2024, TD Bank bought Tennessee’s First Horizon in a USD 13.4 billion deal. Regulators, however, have suspicions that the money laundering activities could have helped speed up the deal.
The sale of First Horizon Bank was barred by the regulators over concerns of suspicious customer transactions. Since then, TD has been quiet on the status of the investigation.
Last year TD disclosed that the bank’s operations were under investigation. However, it was only revealed recently that the focus of the probe was on money laundering operations by drug traffickers and criminals. On 30th April, the bank stated that there were three ongoing investigations against TD in money laundering matters in the US. USD 450 million has been set aside by the bank to resolve one of these investigations and there is a possibility that the bank may face more penalties.
In another statement on 3rd May, Bharat Masrani, CEO of TD, said, “Criminals relentlessly target financial institutions to launder money and TD has a responsibility and an obligation to thwart their illegal activity. I regret that there were serious instances where the Bank’s AML program fell short and did not effectively monitor, detect, report or respond.”
As of now, the US Justice Department is investigating how Chinese drug traffickers allegedly used TD and other banks’ operated to launder at least USD 653 million from fentanyl sales.
On 2nd May, the Canadian Bank regulator fined the bank equivalent of USD 6.7 million as it failed to report suspicious activities and document risks related to terrorist activities and money laundering.
Speaking to The Star, National Bank analyst Gabrial Dechaine said that total penalties in money laundering cases might cost TD Bank as much as CAD 2 billion. Explaining how such activities take place in the banks, Calgary-based anti-money launching compliance and investigations consultant Stephen Scott asserted that it only takes one person per branch to initiate such illegal activities. “It comes down to training and hiring the right people,” he said.
Last week, Canada’s financial-crime watchdog Fintrac also issued a penalty against TD amounting to CAD 9.2 million as it failed to comply with anti-money-laundering and terrorist financing measures. Other banks that were fined by the watchdog were CIBC and RBC with CAD 1.3 million and CAD 7.5 million respectively.
