TD Bank’s AML penalties could top $4 billion, we have inside story on culture clash that led to bank’s lost decade plus how we broke the story

TD Bank’s AML penalties could top $4 billion, we have inside story on culture clash that led to bank’s lost decade plus how we broke the story


From Paul O'Donoghue at AMLi

TD Bank’s AML penalties could top $4 billion, we have inside story on culture clash that led to bank’s lost decade plus how we broke the story

Well August is coming to a close with a bang. All eyes this week have been focused on Canada and the US East Coast after TD Bank announced it is booking €3 billion in provisions against fines and penalties in the U.S.

TD has been embroiled in an egregious episode of enabling money laundering by Chinese fentanyl gangs and Colombian drug traffickers in the U.S. which has been under investigation by federal prosecutors since 2021. It is fair to say the episode has set the bank back at least a decade and stalled its aggressive expansion in the U.S.

The bad news is many observers believe the massive $3 billion provision is not enough and some are predicting the bill will come in north of $4 billion. Moreover, the bank has already spent some $500 million on hirings, firings and a revamp of its FCC teams.

It is a salutary story of a bank board and C-Suite taking their eye off the FCC ball in an all-out attempt to conquer the New York City commuter belt and the wider U.S. East Coast. It has come at an enormous cost, in terms of expansion, careers, and reputation – not to mention the bottom line.

Today we are glad to partner with the investigative journalists at the prestigious Globe and Mail newspaper in Canada to bring you the inside of the cultural shift that seeded a money laundering crisis, succession woes and a leadership exodus at the bank. It’s the story of a project, dubbed ‘Take New York’ by senior executives - and how it led to ruin. Read the full story, here.

Now here’s your end-of-week news blast:

TD BANK'S DIRTY LAUNDRY

TD BANK BREAKDOWN: In 2012, almost a decade into a $20-billion American expansion, the top brass at Toronto-Dominion Bank (TD) felt the time was right to go for all the marbles. Having built beachheads in and around cities such as Boston and Philadelphia, they wanted to infiltrate New York.

It was an audacious idea. New York’s metro area was urban, wealthy and home to Wall Street, which meant it was ultracompetitive. TD also wanted to try something new. Instead of buying its way in, as the bank had done before, then chief executive Ed Clark and then U.S. head Bharat Masrani wanted to build out a branch network brick by brick until the streets were flooded with TD green.

Against all odds, it worked. TD muscled its way to a top-three market share for retail banking in New York, and the strategy became the stuff of internal lore.

A decade in, the conquest has come back to haunt the bank.

Read the inside story of the strategy, culture shift, endless requirement for approvals and the path that led to TD Bank facing down the barrel of a $4 billion AML bill. Read the inside story from the investigative team at The Globe and Mail on what went wrong, here: TD Bank’s dirty laundry – inside the cultural shift that seeded a money laundering crisis, succession woes and a leadership exodus

BANKING CRISIS: TD Bank missed quarterly earnings estimates on Thursday and reported a rare loss after it set aside a further $2.6 billion to prepare for fines from U.S. regulators following investigations into the Canadian lender's AML failings.

That brings the total booked by the bank to meet fines and other penalties to a massive €3 billion.

However, many observers believe the final bill could be north of $4 billion.

"There is a lot more to come, let's put it that way," said one bank insider today (Thursday).

HOW WE BROKE THE STORY ON WEDNESDAY: In anticipation of a global resolution to AML probes by year-end, to include monetary and non-monetary penalties, TD BANK has now set aside a total of over $3 billion, including a $450 million provision it took in April.

"We recognize the seriousness of our U.S. AML program deficiencies and the work required to meet our obligations and responsibilities is of paramount importance," CEO Bharat Masrani said in a statement.

The additional $2.6 billion provision revealed today reflects the current estimate of the total fines related to its AML failures, according to the bank. Our original story breaking the news of the $3 billion provision is here: TD could be facing total bill of $4 billion and north as FCC tardiness haunts bank’s ambitious US expansion

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AML CHIEFS

INTERVIEW WITH JERSEY FIU CHIEF: JERSEY’s FIU is doubling the number of strategic analysts on its workforce as the unit looks to help the British Crown dependency carry out more money laundering prosecutions.

Jonathan Groom MBA , the director of the FIU (Financial Intelligence Unit), also said that he does not think it is fair to "accuse Jersey of being something it isn't" in relation to persistent allegations that the island is a hub for money laundering.

Mr Groom said the organisation is currently in the midst of a recruitment drive which has seen its numbers swell from approximately 12 near the start of 2022 to 30 staff.

WOLFSBERG CHIEF TO RETIRE: Alan Ketley , the executive secretary of the Wolfsberg Group, will retire from his position with the banking group at the end of the year.

The group is now seeking candidates to fill the role, with an application deadline of 26 August.

Announcing the decision, Mr Ketley said he had been “honoured” to work at the organisation, an association of 12 global banks which aims to develop financial crime frameworks and guidance for other lenders.

MONEY LAUNDERING HIGHLIGHTS

US, HONG KONG, DUBAI NEW ILLICIT ASSET HUBS CLAIM: The United States has overtaken Switzerland as the preferred hub for corrupt financial transactions, claims a UK university report. Moreover, Hong Kong and Dubai have surpassed Panama as centres of illicit assets, it alleges.

The University of Sussex study, which analyzes data spanning four decades across more than 70 jurisdictions, analyses the evolution of illicit global financial networks against shifting regulations.

Key trends highlighted by the researchers include the U.S.’s transformation from a proponent of financial transparency abroad to a significant enabler of financial secrecy at home. Over the last 20 years, Washington has successfully pressured other nations to reform their financial systems while largely neglecting to implement equivalent measures domestically.


IMPORTANT DATE:

The International Anti-Financial Crime Summit 2024 (IAFCS2024) will take place on October 9 next in London. This unmissable conference takes place at the 10 Union Street convention centre, located in the heart of London’s business district. The Summit will feature regulators, policymakers, industry leaders and law enforcement chiefs. Leading speakers, panellists and sponsor partners will be announced soon.

Secure your place today and meet your fellow Financial Crime Fighters from around the world at The International Anti-Financial Crime Summit 2024. (An AML Intelligence event)


BAFIN INVESTIGATION: GERMAN authorities this week carried out a major AML operation on Tuesday, seizing 13 crypto ATMs where Bitcoin and other crypto assets were traded.

Financial services watchdog #Bafin, backed up by police and #Bundesbank officials also seized almost €250,000 cash. The raids were carried out at 35 locations across Germany.

The seized devices were operated without the required permission from BaFin and posed money laundering risks, the agency said. The ATM owners face prosecution and up to five years in prison.

SINGAPORE BANKERS CHARGED: TWO Singapore bankers - both Chinese nationals - have been charged with helping a group of foreigners who were convicted of laundering $2.2BN last year in the biggest such financial crime in the Asian financial hub.

Both Wang Qiming and Liu Kai were relationship managers employed by #Citibank and Swiss private bank Julius Baer, according to a Singapore Police Force statement and the court documents.

RBB CONSENT ORDER TERMINATES: RBB Bancorp RBB.O said on Thursday a consent order against the community bank issued by U.S. regulators in October 2023 has been terminated.

It follows the successful resolution of the deficiencies in its Anti-Money Laundering and Countering the Financing of Terrorism program, RBB and its subsidiaries said.

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Have a great Friday 👋

Stephen and the team at AMlintelligence.

Keep an eye on our Homepage & socials for daily updates. See you next week!



Time to redouble efforts and be rigoursly vigilant, not simply collect KYC documents.

Reza Hosseinnejad

CO-Founder of Futurist Home Real Estate

3mo

**Dear Friends, Be Cautious with TD Bank’s E-Transfers** Last month, I encountered significant delays and a lack of response from TD Bank after an issue with a $3,000 e-transfer. Despite providing all the required documentation, the issue remains unresolved. This situation raises serious concerns about the bank's security measures and customer service. Unfortunately, there are gaps in their system that they seem unwilling to address. Although they know the money has left my account and been deposited into an account outside of TD, they refuse to take responsibility and ask for it to be returned. For one of Canada's largest banks, this is unacceptable. I hope this message reaches someone who can advise me on how to recover the money TD mistakenly sent to the wrong account, as they currently refuse to accept responsibility.

Like
Reply
Milind Wagle

Retired from Kotak Mahindra Bank as Sr. VP

4mo

They are taking huge reputational risk by cutting compliance cost. AI can help to achieve better productivity and performance.

Angie Cortez , MBA , CAMS

Accounting | Audit | BSA/AML Compliance | 15+ Years Retail Banking Financial and Legal Services | Willing to relocate

4mo

It’s crucial that the organization significantly intensifies its focus on AML. To strengthen the program, investing in skilled employees who can elevate it from its current state to a highly efficient operation is essential.

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