In a landmark case highlighting the severity of regulatory breaches in the financial sector, TD Bank N.A. (TDBNA), a major player in the U.S. banking landscape, and its parent company, TD Bank US Holding Company (TDBUSH), have pleaded guilty to charges related to violations of the Bank Secrecy Act (BSA) and money laundering. This Td Bank Money Laundering Case has resulted in the bank agreeing to pay over $1.8 billion in penalties, marking a significant financial and reputational blow.
The guilty pleas, announced by the Department of Justice (DOJ), involve TDBNA admitting to conspiring to fail to maintain an adequate anti-money laundering (AML) program, neglecting to file accurate Currency Transaction Reports (CTRs), and engaging in money laundering activities. TDBUSH also pleaded guilty to contributing to TDBNA’s failures in maintaining a compliant AML program and filing accurate CTRs.
This resolution is a coordinated effort with multiple regulatory bodies, including the Board of Governors of the Federal Reserve Board (FRB), the Office of the Comptroller of the Currency (OCC), and the Financial Crimes Enforcement Network (FinCEN).
Historic Guilty Plea Underscores Compliance Failures
Attorney General Merrick B. Garland emphasized the gravity of the situation, stating, “By making its services convenient for criminals, TD Bank became one.” He further highlighted the historic nature of the plea, noting, “Today, TD Bank also became the largest bank in U.S. history to plead guilty to Bank Secrecy Act program failures, and the first US bank in history to plead guilty to conspiracy to commit money laundering.” Garland made it clear that the pursuit of profit over legal compliance has led to severe consequences for TD Bank, and that the investigation is ongoing, with individuals involved not being exempt from scrutiny.
Deputy Attorney General Lisa Monaco echoed this sentiment, pointing out the long-term neglect of TD Bank’s compliance program. “For years, TD Bank starved its compliance program of the resources needed to obey the law,” Monaco stated. She underscored that this case serves as a critical lesson for all financial institutions, urging compliance officials, CEOs, and board members to review the charges as a cautionary tale. The message was clear: prioritizing compliance is not just a legal obligation but a fundamental business imperative.
Systemic Anti-Money Laundering Deficiencies Exposed
According to court documents, the issues within TD Bank’s AML program were not isolated incidents but rather systemic and pervasive, spanning nearly a decade from January 2014 to October 2023. Despite repeated warnings from federal regulators and its own internal audit group regarding the inadequacies of its transaction monitoring program, TD Bank failed to take meaningful corrective action.
Principal Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division, pointed to internal communications within the bank where employees acknowledged that these failures made TD Bank an “easy target” for criminals. She stated, “For nearly a decade, TD Bank failed to update its anti-money laundering compliance program to address known risks…These failures also allowed corrupt bank employees to facilitate a criminal network’s laundering of tens of millions of dollars.” Argentieri emphasized the critical role of financial institutions as the first line of defense against money laundering and the DOJ’s commitment to holding them accountable when they fail in this duty.
A key factor contributing to these failures was a “flat cost paradigm” enforced by senior executives, which mandated no year-over-year budget increases for AML compliance, even as the bank’s profits and risk profile grew significantly. This prioritization of cost-cutting over compliance led to the postponement and cancellation of essential AML projects, further weakening the bank’s defenses against financial crime.
Trillions of Dollars in Unmonitored Transactions
U.S. Attorney Philip R. Sellinger for the District of New Jersey detailed the staggering scale of TD Bank’s oversight failures. “TD Bank prioritized growth and convenience over following its legal obligations,” Sellinger stated. He revealed that the bank willfully failed to monitor trillions of dollars in transactions, including ACH transactions, checks, transactions involving high-risk countries, and peer-to-peer transactions. Astonishingly, 92% of TD Bank’s total transaction volume, amounting to approximately $18.3 trillion between January 1, 2018, and April 12, 2024, went unmonitored.
Furthermore, TD Bank failed to update its transaction monitoring scenarios from 2014 through late 2022 and launched new services like Zelle without ensuring proper monitoring coverage. The bank also neglected to adequately monitor transactions from high-risk countries and even instructed branches to cease filing internal reports on certain suspicious customers. Adding to the severity, TD Bank allowed over $5 billion in transactional activity to occur in accounts even after deciding to close them, demonstrating a profound lack of control and oversight.
Money Laundering Schemes Exploiting AML Weaknesses
The DOJ detailed how TD Bank’s AML failures made it, in the words of its own employees, “convenient” for criminals. These deficiencies facilitated three distinct money laundering networks that collectively moved over $670 million through TD Bank accounts between 2019 and 2023.
One scheme involved large cash deposits exceeding $470 million into nominee accounts between January 2018 and February 2021. Operators of this scheme even bribed bank employees with gift cards worth over $57,000 to ensure continued processing of their suspicious transactions. Despite the obvious red flags, TD Bank employees failed to properly identify the conductors of these transactions in required reports.
Another scheme, running from March 2021 to March 2023, involved a high-risk jewelry business laundering nearly $120 million through shell accounts before TD Bank finally reported the suspicious activity. In a third scheme, money launderers deposited funds in the U.S. and swiftly withdrew them via ATMs in Colombia. Five TD Bank employees conspired with this network, issuing numerous ATM cards to facilitate the laundering of approximately $39 million. The DOJ has charged over two dozen individuals across these schemes, including bank insiders, and TD Bank’s plea agreement includes ongoing cooperation in these investigations.
Financial Repercussions and Remedial Actions
As part of the plea agreement, TD Bank has agreed to a total financial penalty of $1,886,945,780.40, comprising a forfeiture of $452,432,302.00 and a criminal fine of $1,434,513,478.40. The bank will also be subject to an independent compliance monitor for three years and is mandated to remediate and enhance its AML compliance program. The DOJ acknowledged partial credit given to TD Bank for its cooperation and ongoing remediation efforts, resulting in a 20% reduction in the total criminal penalty. However, full credit was not granted due to the bank’s failure to timely escalate relevant AML concerns during the investigation.
This TD bank money laundering case serves as a stark reminder of the critical importance of robust AML compliance programs within financial institutions. The consequences of neglecting these responsibilities can be catastrophic, leading to massive financial penalties, significant reputational damage, and potential criminal charges for individuals involved. For the financial industry, this case underscores the necessity of prioritizing compliance and investing adequately in systems and personnel to prevent money laundering and maintain the integrity of the financial system.
