On Thursday, October 10th, Canada’s TD Bank reached a guilty plea agreement with the U.S. government over money laundering allegations, agreeing to pay a $3 billion fine. Following this agreement, the bank’s U.S. branch will also be subject to asset restrictions. As a result, the bank’s stock price plummeted by 8%.
This fine marks the largest money laundering penalty ever imposed on a bank in the United States, surpassing the nearly $2 billion fine paid by HSBC Bank in 2014. HSBC Bank was fined by the U.S. Department of Justice for failing to monitor billions of dollars in money laundering activities related to a Mexican drug cartel.
In addition, TD Bank’s U.S. branch will be subject to asset restrictions set by the Office of the Comptroller of the Currency (OCC), a division of the U.S. Department of the Treasury. With the existence of these asset limits, the bank’s asset size cannot exceed the current $370 billion threshold.
The Wall Street Journal reported that the asset restrictions could be a significant blow to TD Bank. This Canadian bank has already entered the ranks of the top ten retail banks in the United States through a series of transactions.
The last time asset restrictions were imposed in the U.S. was in 2018 when Wells Fargo faced penalties for its fraudulent account scandal.
Acting Comptroller of the Currency, Michael Hsu, stated that this action by the OCC will ensure that TD Bank focuses on establishing appropriate control measures commensurate with its risk profile.
The U.S. government has been investigating whether TD Bank has implemented adequate anti-money laundering measures.
The investigation revealed that due to lack of controls, a Chinese drug trafficking group used the bank to facilitate money laundering schemes related to fentanyl sales.
This criminal activity involved bribing bank employees at TD Bank’s New York and New Jersey branches, with money laundering amounts related to fentanyl sales reaching hundreds of millions of dollars. For instance, regulators stated that TD Bank allowed three money laundering networks to transfer over $670 million through TD Bank accounts between 2019 and 2023.
According to the Wall Street Journal, federal authorities conducted an investigation into TD Bank’s internal controls and found a conspiratorial network involving traffickers using TD Bank’s New York and New Jersey branches to sell millions of dollars’ worth of fentanyl, while bribing bank employees. The network ultimately transferred over $470 million through TD Bank.
“In the words of its employees, TD Bank’s failures in anti-money laundering provided ‘convenience’ to criminals,” the OCC stated.
The U.S. government agencies that reached the settlement agreement with TD Bank on Thursday include the Department of Justice, the Financial Crimes Enforcement Network (FinCEN), the Federal Reserve, and the Office of the Comptroller of the Currency.
TD Bank CEO Bharat Masrani stated in a statement in August that they acknowledge serious deficiencies in the bank’s anti-money laundering (AML) program in the United States. He emphasized that addressing these issues and ensuring compliance with legal and regulatory obligations are his personal, senior leadership, and board of directors’ top priorities.
Masrani later announced that he will retire from the company in April 2025.
Subsequently, TD Bank’s stock price fell, closing at $59.44 per share as of 4:00 PM Eastern Time.