TD Bank Hit with Record $3 Billion Fine for Money Laundering Lapses

TD Bank has agreed to a historic $3 billion settlement, underscoring the severe consequences of failing to prevent money laundering by criminal organizations. U.S. regulators announced the fine on Thursday, marking the most significant penalty ever imposed on a bank for anti-money laundering violations.

Largest-Ever Penalty Breakdown

The $3 billion settlement includes a $1.3 billion fine to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and $1.8 billion to the U.S. Justice Department. The bank has also agreed to plead guilty to violating the Bank Secrecy Act. This follows a thorough investigation that revealed TD Bank’s failure to monitor suspicious activities, allowing criminal enterprises to launder over $670 million through its accounts between January 2018 and April 2024.

Investigators found that over 90% of transactions went unmonitored, creating an environment where money laundering networks could flourish. In one case, TD Bank employees accepted $57,000 worth of gift cards in exchange for ensuring that $470 million in cash deposits from illicit networks went unreported.

Regulatory Clampdown and Growth Restrictions

In addition to the financial penalties, the Office of the Comptroller of the Currency (OCC) has placed severe restrictions on TD Bank’s expansion in the U.S. The bank is now subject to an “asset cap,” limiting its growth to $370 billion in assets. This mirrors actions taken against Wells Fargo in 2018 after its own compliance failures, which continue to restrict the bank’s growth today.

FinCEN will also monitor TD Bank closely over the next four years to ensure improvements in its anti-money laundering controls. The Federal Reserve has additionally mandated that TD Bank relocate its anti-money laundering compliance office to the U.S. to improve oversight.

Market Reaction and Investor Concerns

The announcement shocked financial markets, leading to a 6% drop in TD Bank’s U.S.-listed shares. Investors, who had been optimistic about the bank’s growth in the U.S., are now preparing for the financial impact of higher legal costs and the limitations on expansion. Analysts warn that TD Bank may need to explore new growth strategies in light of the restrictions.

Government Focus on Criminal Networks

The settlement highlights the U.S. government’s growing concern over the exploitation of the financial system by criminal networks, including Mexican drug cartels. Federal prosecutors noted that proceeds from illegal drug sales, like fentanyl, are frequently laundered through U.S. banks. In TD Bank’s case, systemic failures in monitoring and reporting suspicious activity allowed these criminal organizations to operate undetected for years.

Government officials are also working with smaller banks to improve detection of money laundering activities at the community level, as part of a larger effort to combat increasingly sophisticated laundering schemes.

Previous Legal Troubles

This is not TD Bank’s first legal challenge. In 2023, the bank paid $1.2 billion to settle a lawsuit related to its involvement in the $7 billion Ponzi scheme led by Allen Stanford. That settlement was used to compensate victims of the scheme, though TD Bank denied any wrongdoing.

Ongoing Compliance Monitoring

As part of the settlement, TD Bank has agreed to retain an independent monitor to oversee its compliance with anti-money laundering regulations. This independent review is expected to help rebuild trust with regulators and ensure that the bank meets strict compliance standards moving forward.