TD Bank, one of North America’s largest financial institutions, has been hit with a historic $3.1 billion settlement for egregious failures in its anti-money laundering (AML) program. This case represents one of the most significant AML enforcement actions in U.S. history, both in terms of the financial penalties imposed and the severity of the admitted misconduct. Only Binance, with its $4.1 billion settlement, was even larger.

Key Details of the Settlement

TD Bank has pleaded guilty to criminal charges, including conspiracy to violate the Bank Secrecy Act and commit money laundering. The penalties include:

• $1.8 billion fine to the U.S. Department of Justice (DOJ)
• $1.3 billion penalty to the Financial Crimes Enforcement Network (FinCEN)
• $450 million to the Office of the Comptroller of the Currency
• Additional payments to other regulators

Beyond the financial penalties, TD Bank faces significant operational restrictions:

• An asset cap limiting its growth in the U.S. market
• Required approval from regulators before opening new branches or launching new products/services
• Imposition of independent monitors for 3-4 years

Nature and Scope of Violations

The investigation revealed systemic and long-standing deficiencies in TD Bank‘s AML program from 2014 to 2023. Key failings include:

• Failure to monitor $18.3 trillion in customer activity
• Enabling three money laundering networks to transfer over $670 million through TD accounts
• Inadequate transaction monitoring and suspicious activity reporting
• Insufficient due diligence on high-risk customers and transactions

Specific Illicit Activities Facilitated

The bank’s failures allowed various criminal enterprises to exploit its services:

• Processing over $400 million in transactions for a convicted money launderer linked to narcotics trafficking
• Facilitating transactions indicative of human trafficking through peer-to-peer payment platforms
• Enabling fentanyl trafficking proceeds to flow back to drug syndicates in Mexico and China

Systemic Issues and Cultural Failures

The investigation uncovered a pervasive culture of non-compliance within TD Bank:

• Senior executives enforced a “flat cost paradigm” that starved AML programs of necessary resources despite increasing risks
• Employees openly joked about the bank’s lack of compliance measures
• The bank ignored warnings from regulators and internal auditors about AML deficiencies

Significance and Implications

This settlement is groundbreaking in several ways:

1. It represents the largest penalty ever imposed under the Bank Secrecy Act6.
2. TD Bank is the largest bank in U.S. history to plead guilty to Bank Secrecy Act violations2.
3. The imposition of an asset cap is a rare and severe regulatory measure, typically reserved for the most egregious cases7.

The case underscores the critical importance of robust AML programs in the financial sector and demonstrates regulators’ willingness to impose severe penalties for systemic compliance failures. It also highlights the potential reputational and financial risks associated with inadequate investment in compliance infrastructure. As the investigation continues, there may be further individual prosecutions of bank employees involved in these schemes.