TD Bank US growth halted with $4.5b AML settlement hit: WSJ
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The news: Toronto-Dominion Bank will plead guilty to criminal charges and pay USD3 billion ($4.46 billion) in penalties to settle allegations it failed to monitor money laundering by drug cartels in the US, The Wall Street Journal reported citing unnamed sources.
The lender will also face restrictions on its retail expansion in the US, the paper said, with an asset cap imposed by the Office of the Comptroller of the Currency (OCC) as part of the settlement, which is expected to be announced soon.
The context: The settlement comes after authorities launched an investigation into TD's internal controls when agents uncovered that a Chinese criminal group had funnelled millions of dollars from fentanyl sales through TD branches in New York and New Jersey, and bribed bank staff, according to the Journal.
TD has since spent millions on compliance improvements, set aside USD3 billion for penalties, fired staff and named Raymond Chun, its Canadian personal banking head, as its new CEO, distancing him from the money laundering scandal.
CEO Bharat Masrani, who has been overseeing efforts to resolve the issues, will step down later this year. Last year, concerns over TD’s anti-money laundering controls blocked TD’s planned USD13.4 billion acquisition of First Horizon, the largest US bank termination ever.
In addition to restricting TD Bank's retail growth, the asset cap is a significant regulatory measure that limits the bank’s overall expansion in the US market, essentially freezing its ability to grow until it resolves its compliance issues and satisfies regulatory requirements.
This type of restriction mirrors actions taken against other major banks, such as Wells Fargo, which faced similar caps due to regulatory failures.
The numbers: The USD3 billion in penalties will be divided between US regulators, including the Justice Department and the Financial Crimes Enforcement Network (FinCEN), with the Justice Department receiving USD1.8 billion.
TD’s US unit is expected to plead guilty and operate under the scrutiny of independent monitors for four years.
TD shares fell as much as 6.59% following the news, with analysts viewing the cap on US retail growth as the biggest blow, as the plea had been expected and the company had already made provisions of a similar magnitude.
https://www.reuters.com/business/finance/canadas-td-bank-plead-guilty-us-charges-it-failed-properly-monitor-money-2024-10-10/Having built one of the largest US retail banks through acquisitions like Banknorth, Commerce Bank and others, TD now faces stalled growth and a prolonged earnings slump.
The sources: The Wall Street Journal, Reuters
