TD Bank to pay $3B, face growth cap over money laundering violations

Toronto-Dominion Bank, commonly referred to as TD Bank, pleaded guilty Thursday to violating federal anti-money laundering and bank transparency laws, agreeing to pay more than $3 billion and limit its future growth.

TD Bank, which is based in Canada, will pay billions of dollars in fines and penalties to several federal agencies, including the Federal Reserve and the Office of the Comptroller of the Currency (OCC), federal officials announced.

TD Bank allegedly failed to adequately oversee its retail banking operations, which allowed a subsidiary to be used to launder hundreds of millions of dollars through drug trafficking.

The bank allegedly failed to monitor $18.3 trillion in customer activity over a six-year period, allowing three money laundering networks to move millions of dollars through its accounts.

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

The Department of Justice (DOJ) is also prosecuting two dozen individuals for their involvement in money-laundering schemes that moved more than $670 million in illegal funds through TD Bank accounts. Two TD employees were charged.

“Our laws dictate that the narcotics traffickers who flood our communities with deadly drugs cannot use American financial institutions to move their money. And our anti-money laundering laws dictate that a bank that willfully fails to protect against criminal schemes is also a criminal. That is what TD Bank was,” Garland added.

In a statement, TD Bank Group President and CEO Bharat Masrani said, “We have taken full responsibility for the failures of our U.S. AML program and are making the investments, changes and enhancements required to deliver on our commitments. This is a difficult chapter in our Bank’s history. These failures took place on my watch as CEO and I apologize to all our stakeholders.”

“I want to thank our colleagues, who continue to demonstrate their dedication and who play an important role in preventing criminal activity,” he continued.

One scheme moved more than $470 million through TD Bank branches in the U.S. and bribed TD bank employees with more than $57,000 in gift cards. Garland described the illegal conduct as “obvious, to say the least.”

In another scheme, five TD employees worked with criminal organizations to open accounts that were used to launder $39 million to Colombia, including drug proceeds.

“Despite significant internal red flags, the bank did not identify that its own employees were conspiring to launder tens of millions of dollars to Colombia until law enforcement arrested them,” the attorney general said.

Some 92 percent of TD Bank’s transactions went unmonitored between January 2018 and April 2024, according to the DOJ.

The bank is the largest in U.S. history to plead guilty to charges under the Bank Secrecy Act and the first to plead guilty to conspiracy to commit money laundering, Garland said. The penalty levied against TD is the largest ever under the Bank Secrecy Act.

TD Bank’s penalty is also the largest paid by a bank since federal regulators slapped Wells Fargo with a $1 billion fine in 2018 in what became one of the biggest banking scandals since the 2007-08 financial crisis and recession.

Wells Fargo has also been subject to an asset cap since February 2018, which has prevented the bank from growing beyond $1.95 trillion. TD Bank will be subject to a similar limit, which could seriously impair the bank’s ability to compete with rivals.

As part of the settlement, TD Bank’s total assets will be capped at $434 billion — its total assets as of Sept. 30. However, this could be reduced by 7 percent if the bank fails to comply with other conditions of the agreement; for each subsequent year of noncompliance, the cap could be cut by another 7 percent.

The bank must also receive the OCC’s approval to open new branches, enter new markets and launch new products and services.

It is also required to open a new office in the U.S. to address the concerns and relocate the parts of its anti-money laundering compliance program that are responsible for complying with U.S. law to the states.

Despite the steep fine and unprecedented penalties, the DOJ and OCC faced immediate pushback from one prominent bank critic for not hitting TD Bank harder.

“$3B seems like a lot, but to big banks like @TDBank_US, it’s just the cost of doing business,” Sen. Elizabeth Warren (D-Mass.) wrote on the social platform X.

“This settlement lets bank executives off the hook for allowing TD to be used as a criminal slush fund. @TheJusticeDept & @USOCC must do better in enforcing anti-money laundering laws.”

Warren has been one of Washington’s top critics of the banking industry and the federal agencies responsible for overseeing it. She has repeatedly called for federal bank regulators to break up Wells Fargo and blasted Federal Reserve Chair Jerome Powell for not taking stronger steps to rein in banks.

Updated at 2:44 p.m. EDT