TD Bank’s $3 billion settlement included coordinated regulatory settlements with the Federal Reserve Board (“Federal Reserve”), The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”), and the Office of the Comptroller of the Currency (“OCC”).  Each regulator imposed civil penalties and remedial measures. 

The Federal Reserve fined TD Bank $123.5 million for AML compliance violations.  The Federal Reserve also required TD Bank to implement enhanced compliance measures and steps to correct risk management deficiencies. Specifically, TD Bank failed to conduct adequate risk management and oversight of its retail banking operations in the United States, resulting in a U.S. subsidiary being used to launder hundreds of millions of dollars in illicit proceeds.

The Federal Reserve required TD Bank to:

• Establish a new office in the United States dedicated to remediating the deficiencies identified in the order;
• Relocate to the United States the parts of its anti-money laundering compliance program that are responsible for complying with U.S. law. This program will be subject to oversight by U.S. regulators;
• Certify that sufficient resources and attention are allocated to correcting the firm’s anti-money laundering deficiencies prior to issuing any dividends or capital distributions; and
• Undertake a thorough and independent review of the firm’s board of directors and management to ensure adequate oversight of the U.S. operations.

FinCEN assessed a record $1.3 billion penalty against TD Bank for violations of the Bank Secrecy Act (“BSA”), the primary U.S. anti-money laundering (“AML”) law that safeguards the financial system from illicit use. FinCEN’s action also imposes a four-year independent monitorship to oversee TD Bank’s required remediation.

TD Bank admitted that it willfully failed to implement and maintain an AML program that met the minimum requirements of the BSA and FinCEN’s implementing regulations. FinCEN’s investigation revealed that TD Bank knew that its AML program was neither appropriately designed nor adequately resourced to mitigate the actual illicit finance risks that it faced on multiple fronts.

Among other failures, TD Bank’s processing of peer-to-peer transactions (e.g., Venmo and Zelle), including transactions indicative of human trafficking, was insufficient, and as a result, TD Bank failed to identify and timely report these transactions to FinCEN. TD Bank also allowed significant backlogs of potentially suspicious activity to persist, thereby depriving law enforcement of necessary information. TD Bank knew that it was the subject of significant funnel account activity involving high-risk countries yet failed to take timely action to address this substantial risk.

TD Bank also failed to timely detect suspicious activity involving its own employees. For example, in 2021, a TD Bank employee facilitated the laundering of narcotics proceeds in exchange for bribes. This employee opened numerous accounts, including for shell companies, that then engaged in millions of dollars’ worth of funnel account activity in a high-risk jurisdiction where TD Bank maintained no operations. TD Bank knew that this type of activity was not subject to appropriate controls and failed to mitigate this glaring risk.

As a result of these failures, TD Bank allowed trillions of dollars in transactions annually to go unmonitored for potentially suspicious activity that would require reporting to FinCEN. Specifically, during the time period covered by the Consent Order, TD Bank willfully failed to file Suspicious Activity Reports (“SARs”) on thousands of suspicious transactions—totaling approximately $1.5 billion. Additionally, TD Bank’s Currency Transaction Reports (“CTRs”) of large cash transactions were often delayed, and, in some instances, misleading to law enforcement.

TD Bank has agreed to engage an independent consultant, who, under the auspices of FinCEN’s monitor, would conduct a historical analysis of TD Bank’s transaction data, often referred to as a “SAR lookback,” to remediate the SAR filings that TD Bank missed due to its extensive control gaps. TD Bank has also agreed that the monitor will oversee an independent, end-to-end review of its AML Program. For the first time, FinCEN is imposing accountability and data governance reviews.

The OCC and TD Bank reached a settlement and agreed to a cease and desist order and a $450 million civil money penalty for deficiencies in the bank’s BSA and AML compliance program.  Significantly, the OCC imposed a restriction on TD Bank’s growth and a measure designed to ensure that the bank invests sufficient resources to remediate its BSA/AML deficiencies in a timely manner.

The OCC determined that the bank failed to develop and maintain a BSA/AML program reasonably designed to assure and monitor compliance with the BSA and its implementing regulations. Deficiencies in the bank’s BSA/AML program included those related to internal controls and risk management practices; risk assessments; customer due diligence; customer risk ratings; suspicious activity identification, evaluation, and reporting; governance; staffing; independent testing; and training, among others.