5 things to know about the TD Bank scandal

Toronto-Dominion Bank, commonly known as TD Bank, is facing unprecedented fines and penalties from US officials after allegedly failing to stop hundreds of millions of dollars in drug money laundering.

The bank agreed to pay more than $3 billion to various U.S. agencies and limit its growth until officials say TD Bank has done enough to fix its internal oversight problems. The United States can also force TD Bank to reduce its assets if it cannot comply with the terms of the settlement.

Here are five things to know about the TD Bank money laundering scandal.

Money laundering networks moved $670 million through TD accounts

Three money laundering rings took advantage of TD Bank’s alleged failures, moving more than $670 million through TD accounts between 2019 and 2023, according to the Justice Department.

Over a six-year period from January 2018 to April 2024, the bank failed to monitor $18.3 trillion in customer activity, 92 percent of its total transaction volume.

“TD Bank created an environment that allowed financial crimes to thrive. By making its services convenient for criminals, it became one,” Attorney General Merrick Garland said at a news conference Thursday.

An “easy target” for criminals

A scheme allegedly moved more than $470 million in illicit funds through TD Bank between January 2018 and February 2021 and bribed TD employees with gift cards worth more than $57,000, it said the government

The individual behind the scheme, known to TD employees as David, “had attempted to launder money through numerous financial institutions, but found TD Bank to have the most permissive policies and procedures and therefore chose launder most of their funds there,” Garland. he said

The attorney general described David’s conduct as “obvious to say the least,” noting that he deposited more than $1 million in cash in a single day on multiple occasions and immediately moved out of the bank through bank checks and wire transfers banking

In another scheme, five TD employees helped launder $39 million in Colombia. A third money-laundering ring maintained accounts for at least five shell companies at TD Bank that they used to transfer nearly $120 million.

TD employees appeared to be aware of the bank’s problems, with one describing it as an “easy target” for the “bad guys” and another describing it as “convenient.”

“There is nothing wrong with a bank that tries to make its services convenient for its honest customers. But there is something terribly wrong with a bank that knowingly makes its services convenient for criminals,” Garland said.

TD Bank makes unwanted history

TD Bank’s alleged money laundering violations made history

The bank is the largest in US history to plead guilty to charges brought under the Bank Secrecy Act (BSA), which requires banks to keep records intended to prevent and detect financial crimes. TD Bank will also pay the largest fine ever issued for a BSA violation and is also the first bank to plead guilty to conspiracy to commit money laundering.

“Our anti-money laundering laws dictate that a bank that willfully fails to protect against criminal schemes is also a criminal. That’s what TD Bank was,” Garland said.

The crackdown on TD Bank is the most aggressive federal action taken against a major bank since historic sanctions imposed on Wells Fargo in 2018. Wells Fargo was fined $1 billion and forced to limit its total assets to $1.9 trillion after a series of sales. scandals

TD Bank may be forced to downsize

Like Wells Fargo, TD Bank will be subject to a cap on its assets, preventing the bank from growing beyond $434 billion, its asset level as of Sept. 30. But TD Bank will also be forced to shrink if it fails to achieve changes specified by federal bank regulators.

If TD Bank cannot achieve these changes by a deadline set by the Office of the Comptroller of the Currency (OCC), its main federal regulator, it will be forced to reduce its total assets by up to 7 percent. The OCC could ask TD Bank to take another cut of up to 7 percent for each year it violates the new order.

“TD Bank’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’s egregious risk management failures attracted illicit actors and are egregious and unacceptable,” said Michael J. Hsu, comptroller of the currency.

“Coordinated and comprehensive action by the OCC, including the imposition of an asset limit, will ensure that the bank focuses on creating appropriate controls consistent with its risk profile.”

Critics of the bank say more needs to be done

While TD Bank’s liquidation may be historic, it has done little to appease financial industry critics and policymakers who support tighter banking rules.

Sen. Elizabeth Warren (D-Mass.), a longtime critic of big banks, said the $3 billion in fines is simply “the cost of doing business” for a company the size of TD Bank.

“This deal allows bank executives to get away with allowing TD to be used as a fund for criminal wrongdoing. @TheJusticeDept & @USOCC must do better to enforce anti-money laundering laws.”

Warren and other financial regulatory hawks have long called on the agencies to crack down on big banks that violate the laws.

University of Michigan business law professor Jeremy Kress, a former Federal Reserve lawyer, praised the OCC for potentially forcing TD Bank to reduce its assets, but said it should be mandatory.

“The OCC appears to have learned from the Fed’s extended Wells Fargo asset cap: TD’s asset cap states that the OCC can require TD to *reduce* its assets by 7% for each year of ‘breach,'” Kress wrote on the social platform X. .

“My only issue: The reduction should be mandatory, not at the discretion of the OCC.”

For the latest news, weather, sports and live video, go to The Hill.