TD Bank pleads guilty to US charges, faces business restrictions | Money laundering news

Federal authorities began investigating TD’s internal controls after agents discovered that a Chinese criminal operation had bribed employees and moved large bags of cash into branches to launder millions of dollars.

According to U.S. authorities, two TD Bank subsidiaries have pleaded guilty and agreed to pay a total of $3 billion in penalties to resolve the federal government’s money laundering investigation.

The agreement included imposing an asset cap and other restrictions on the company’s business, authorities said Thursday. The U.S. Department of Justice said the bank pleaded guilty to conspiracy to commit money laundering and failure to file accurate reports or maintain a lawful anti-money laundering program.

The cap imposed by the Office of the Comptroller of the Currency on the expansion of its assets in the United States is a rare move usually reserved for serious cases. That would be a major blow to TD’s hopes of further expansion in the U.S., where about a third of the bank’s revenue comes from.

TD also agreed to pay $3 billion in combined penalties to the U.S. Banking Regulatory Commission, the Justice Department and the Treasury Department’s Financial Crimes Enforcement Network.

The agreement concluded investigations by the Justice Department, the Office of the Comptroller of the Currency and the Treasury Department’s Financial Crimes Enforcement Network. This also included the introduction of independent monitoring.

An asset cap is the “worst-case scenario” for TD, said Lemar Persaud, an analyst at Cormark Securities, before details of the plea deal were announced. The bank had already set aside $3 billion for the penalty.

Persaud drew a parallel with Wells Fargo, which has a $1.95 trillion asset cap in place after a fake accounts scandal that reduced its earnings. An asset cap would also limit TD’s profits, but to a lesser extent than Wells Fargo, he said.

The TD investigation resulted in “significant underperformance of the stock and, we believe, the resignation of current CEO Bharat Masrani,” Persaud said.

TD is Canada’s second largest bank and the tenth largest in the United States. The lender first announced last year that it was responding to inquiries from regulators and law enforcement agencies, just months after completing a $13 billion takeover of regional lender First Horizon.

Federal authorities began investigating TD’s internal controls after agents discovered that a Chinese criminal operation bribed employees and moved large bags of cash into branches to launder millions of dollars in fentanyl sales through TD branches in New York and New Jersey, like a source confirmed.

TD has spent millions to strengthen its compliance programs, laid off dozens of employees at its U.S. branches and named its Canadian head of retail banking, Ray Chun, as its new CEO, distancing its new boss from the money laundering scandal.

CEO Masrani, who has been at the helm for nearly a decade and previously led the U.S. business, will retire next year. Masrani said he took full responsibility for the money laundering problems that plagued the bank.