“By making its services convenient for criminals, it became one.” Attorney General Merrick Garland said that of TD Bank on October 10, the day the U.S. Department of Justice announced a $3-billion settlement with the lender.
The deal includes a record $1.3 billion in penalties to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and $1.8 billion to the DOJ. TD Bank also admitted it violated the Bank Secrecy Act, which requires financial institutions to run effective programmes for detecting and reporting suspicious customer activity. Garland said it became the largest bank in U.S. history to plead guilty to Bank Secrecy Act program failures, and the first to plead guilty to conspiracy to commit money laundering. “TD Bank chose profits over compliance with the law,” he said. “Our investigation continues, and no individual involved in TD Bank’s illegal conduct is off limits.”
Bags of cash in Queens
The Wall Street Journal was first to report the settlement. According to the paper, the inquiry into the 10th largest U.S. bank began in 2021, when law-enforcement agents trailed Da Ying Sze and his money-laundering ring as they drove between TD Bank branches in Queens, New York, depositing bags of cash with tellers’ help. Garland said Sze found TD Bank to have the most permissive policies of the several banks he tried, and he handed employees more than $57,000 in gift cards.
FinCEN said the bank handled over $400 million in transactions for Sze between 2017 and 2021. He pleaded guilty to money laundering in 2022 for helping hide narcotics proceeds. The bank did not file suspicious activity reports on much of this activity, and it failed to identify Sze in more than 500 currency transaction reports totalling more than $400 million.
A budget freeze
The DOJ said that from January 2014 to October 2023, TD Bank had “long-term, pervasive, and systemic deficiencies” in its U.S. controls and did not fix them. Senior executives instead imposed a budget mandate known internally as a “flat cost paradigm”, under which the budget could not grow year over year even as profits and risk climbed sharply.
The bank’s transaction monitoring stayed “effectively static” from 2014 through 2022. It added no new monitoring scenarios and made no material changes to existing ones. As a result, 92 percent of total transaction volume went unmonitored from January 1, 2018, to April 12, 2024, roughly $18.3 trillion of activity. Three money-laundering networks moved more than $670 million through TD Bank accounts between 2019 and 2023. FinCEN also cited a 2021 case in which an employee helped launder narcotics proceeds in return for bribes.
Terms and criticism
Under the plea agreement, TD Bank will forfeit just over $452 million, of which $123.5 million goes toward a coordinated resolution with the Federal Reserve, and pay a criminal fine of $1.4 billion. It must keep an independent compliance monitor for three years and strengthen its anti-money-laundering programme. Incoming chief executive Raymond Chun told investors: “We will make the necessary changes to put the bank on a stronger foundation.”
Not everyone thinks the penalty is enough. In an October 30 letter to Garland and Deputy Attorney General Lisa Monaco, Senator Elizabeth Warren, a Massachusetts Democrat, said the DOJ moved some liabilities from the Canadian parent to its U.S. holding entity. She also said that by not charging the bank with money laundering, the DOJ avoided triggering the Office of the Comptroller of the Currency’s “death penalty” provision, which would have required notice of intent to end the bank’s charter. “These charging decisions represent absurd legal gymnastics,” Warren wrote.
