TD Bank Shares Slide After Agreeing To $3 Billion Fine In Money Laundering Case

Topline

TD Bank will pay $3 billion in penalties to regulators as part of an agreement announced Thursday, sending the bank’s stock tumbling around 5% after it pleaded guilty to failing to maintain an anti-money laundering program, making itself into an “easy target” for financial criminals.

Key Facts

TD Bank’s U.S. arm “failed to appropriately fund and staff” its anti-money laundering program, according to the Justice Department, which said the bank was aware it allowed money laundering networks belonging to international drug traffickers to flourish.

The Office of the Comptroller of the Currency—a federal bank regulator—said in a statement TD processed hundreds of millions of dollars of transactions that showed indicators of suspicious activity, “creating a potential for significant money laundering, terrorist financing, or other illicit financial transactions.”

TD Bank will pay $1.8 billion to the Justice Department, $1.3 billion to the Financial Crimes Enforcement Network and $450 million to the Office of the Comptroller of the Currency.

The bank will also be subject to restrictions on its growth in the U.S. and a monitoring program, according to a statement from the Office of the Comptroller of the Currency, which said TD’s “persistent prioritization of growth over controls allowed its employees to break the law and facilitate the laundering of hundreds of millions of dollars.”

The bank apologized in a statement and said it will address the issues raised by regulators, promising to boost its anti-money laundering division.

TD Bank shares are down over 5% to just above $59 as of Thursday afternoon, effectively erasing weeks worth of gains they experienced in September, when they peaked at $64.56.

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CRUCIAL QUOTE

“Criminals were able to exploit our systems and our U.S. AML program did not deliver,” TD Bank CEO Leo Salom said in a statement, which noted a “multi-year effort” will be needed to properly fix the bank’s anti-money laundering program.

SURPRISING FACT

TD Bank’s U.S. retail bank unit, which will be impacted by the growth restriction, accounted for about a third of its total earnings, The Wall Street Journal reported, citing National Bank Financial analyst Gabriel Dechaine.

TANGENT

TD Bank’s newly imposed growth cap will stop the assets of its U.S. banking subsidiaries from exceeding $434 billion, according to CNBC, which likened the punishment to one Wells Fargo was hit with in 2018, when it was hit with a $1.95 trillion asset cap and a $3 billion penalty over its fake accounts scandal in 2016. TD Bank’s stock is now down more than 7% since the start of the year, when it traded at $64.27 per share.

KEY BACKGROUND

TD Bank found itself under federal scrutiny earlier this year when investigators found millions of dollars generated by fentanyl sales were flowing through branches in New York and New Jersey, with a Chinese criminal group bribing bank employees to help do so, according to the Journal. The investigation piled on to pre-existing concerns from regulators about the bank’s anti-money laundering program, which was improperly maintained between January 2014 and October 2023, according to the Justice Department. The DOJ said the bank “failed to monitor $18.3 trillion in customer activity.”

FURTHER READING

TD Bank Agrees to $3 Billion in Penalties and Growth Restrictions in U.S. Settlement (WSJ)

TD Bank pleads guilty in money laundering case, will pay $3 billion in penalties (CNBC)