TD Bank to pay $3 billion and restrict growth for BSA/AML deficiencies

The OCC has announced a cease and desist order and a $450 million civil money penalty against TD Bank, N.A. and TD Bank USA, N.A. (bank), for deficiencies in the bank’s Bank Secrecy Act (BSA) and anti-money laundering (AML) compliance program. Yesterday’s action also imposes a restriction on the growth of the bank and a measure designed to ensure that the bank invests sufficient resources to remediate its BSA/AML deficiencies in a timely manner.

“TD Bank’s persistent prioritization of growth over controls allowed its employees to break the law and facilitate the laundering of hundreds of millions of dollars. The bank’s blatant risk management failures attracted illicit actors and are egregious and unacceptable,” said Acting Comptroller of the Currency Michael J. Hsu.

The OCC determined that the bank failed to develop and maintain a BSA/AML program reasonably designed to assure and monitor compliance with the BSA and its implementing regulations. Deficiencies in the bank’s BSA/AML program included those related to internal controls and risk management practices; risk assessments; customer due diligence; customer risk ratings; suspicious activity identification, evaluation, and reporting; governance; staffing; independent testing; and training, among others.

The OCC also found that the bank had significant, systemic breakdowns in its transaction monitoring program. The bank processed hundreds of millions of dollars of transactions with clear indicia of highly suspicious activity, creating a potential for significant money laundering, terrorist financing, or other illicit financial transactions. The bank repeatedly failed to take appropriate and timely corrective action to address the highly suspicious activity and failed to properly emphasize BSA/AML compliance.

The bank had a systemic breakdown in its processes to identify and report suspicious activity, and a pattern or practice of noncompliance with the suspicious activity report filing requirement, resulting in numerous violations. The bank also violated currency transaction reporting requirements on numerous occasions.

There were concurrent actions by the Department of Justice, the Board of Governors of the Federal Reserve System, and the Financial Crimes Enforcement Network. The OCC-assessed penalty will be directed to the U.S. Treasury.

FinCEN announced it was assessing a record $1.3 billion penalty against TD Bank, N.A. and TD Bank USA, N.A. for violations of the Bank Secrecy Act.

FinCEN’s $1.3 billion settlement is the largest penalty against a depository institution in U.S. Treasury and FinCEN history. FinCEN’s action also imposes a four-year independent monitoring requirement to oversee TD Bank’s required remediation.

The Federal Reserve Board reported it has fined Toronto-Dominion Bank $123.5 million for violations related to anti-money laundering laws. The Board is also requiring TD to implement enhanced measures to comply with anti-money laundering laws and to correct its risk management deficiencies. The bank must—

• Establish a new office in the United States dedicated to remediating the deficiencies identified in the order;
• Relocate to the United States the parts of its anti-money laundering compliance program that are responsible for complying with U.S. law. This program will be subject to oversight by U.S. regulators;
• Certify that sufficient resources and attention are allocated to correcting the firm's anti-money laundering deficiencies prior to issuing any dividends or capital distributions; and
• Undertake a thorough and independent review of the firm's board of directors and management to ensure adequate oversight of the U.S. operations.

Canada's Office of the Superintendent of Financial Institutions, the home country supervisor of TD, can act in the implementation of these requirements as permitted by its legal authority.

The Department of Justice announced that TD Bank N.A. (TDBNA), the 10th largest bank in the United States, and its parent company TD Bank US Holding Company (TDBUSH) (together with TDBNA, TD Bank) pleaded guilty and agreed to pay over $1.8 billion in penalties to resolve the Justice Department’s investigation into violations of the Bank Secrecy Act (BSA) and money laundering.