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The OCC, Federal Reserve Board, Department of Justice and FinCEN have announced coordinated actions against Toronto-Dominion Bank, TD Bank US Holding Company, TD Bank, N.A., and TD Bank USA, N.A. for deficiencies in the bank’s Bank Secrecy Act (BSA) and anti-money laundering (AML) compliance program. Yesterday’s actions also impose 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.

The regulators and the Justice Department found 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.

• The OCC imposed a $450 million civil money penalty and imposed a limit on asset growth on TD Bank, N.A. and TD Bank USA, N.A.
• FinCEN imposed a $1.3 billion penalty and a four-year monitoring requirement.
• The Federal Reserve Board reported it has fined Toronto-Dominion Bank $123.5 million and imposed enhanced measures to comply with anti-money laundering laws and to correct its risk management deficiencies.
• The Department of Justice announced that TD Bank N.A., and its parent company TD Bank US Holding Company pleaded guilty and agreed to pay over $1.8 billion in penalties.

For additional information see "TD Bank to pay $3 billion and restrict growth for BSA/AML deficiencies," in the BankersOnline Penalties pages.

The Federal Bureau of Investigation has issued a Public Service Announcement concerning a counterfeit check scheme in which fraudsters target law firms engaged in collections work by deceptively contracting their services to ultimately defraud them. The FBI said the scheme may focus on any type of representation where a lawyer is hired to assist in the transfer or collection of money, e.g. real estate, collection matters, collaborative law agreements in family matters, etc. This scenario continues to be replayed as part of a sophisticated scam that targets collections lawyers and the scope is constantly evolving.

In general, said the FBI, the scheme involves a phony debtor sending a fraudulent check to a collections law firm to satisfy a non-existing debt, and the law firm wire transferring all or part of the check to its client -- the party behind the scheme. The law firm's bank charges the deposited check back to the law firm when it learns it was fraudulent, and the law firm is left with the loss.

Yesterday, the Treasury Department reported that OFAC has designated three individuals and one sham charity that are prominent international financial supporters of Hamas, as well as one Hamas-controlled financial institution in Gaza. OFAC also designated a longstanding Hamas supporter and nine of his businesses. These actors play critical roles in external fundraising for Hamas, often under the guise of charitable work, that finance the group’s terrorist activities. Yesterday’s action, which was taken under the counterterrorism authority in Executive Order 13224, highlights the abuse of the non-profit organization (NPO) sector by terrorist financiers through the use of sham charities to generate revenue.

For the names and identification information of the designated parties, see yesterday's BankersOnline OFAC Update.

Yesterday, the OCC reported it had issued a proclamation allowing national banks, federal savings associations, and federal branches and agencies of foreign banks to close offices in areas of Florida affected by Hurricane Milton.

In issuing the proclamation, the OCC expects that only those bank offices directly affected by potentially unsafe conditions will close. Those offices should make every effort to reopen as quickly as possible to address the banking needs of their customers.

• OCC Bulletin 2012-28, Supervisory Guidance on Natural Disasters and Other Emergency Conditions

FinCEN has posted additions and updates to its FAQ page on the Beneficial Ownership Information Reporting requirements. Updated and added questions are dated October 3, 2024.

The Federal Reserve Board has released two enforcement actions.

The Treasury Department yesterday reported that OFAC designated one individual and three companies that have facilitated weapons procurement and smuggling operations for Ansarallah, commonly known as the Houthis. This action targets key procurement operatives and suppliers located in Iran and the People’s Republic of China (PRC) that have enabled the Houthis to acquire dual-use materials and components needed to manufacture, maintain, and deploy an arsenal of advanced missiles and unmanned aerial vehicles (UAVs) against U.S. and allied interests.

Additionally, OFAC designated one entity and two vessels linked with illicit Houthi and Iranian commercial shipments, including one that has transported shipments for Houthi financial official Sa’id al-Jamal and an affiliate of Iran’s Armed Forces General Staff.

For the names and identification information of the designated individuals, entities and vessels, see yesterday's BankersOnline OFAC Update.

The FDIC, Federal Reserve Board, NCUA, OCC and state financial regulators have issued an interagency statement on supervisory practices regarding financial institutions affected by Hurricane Helene. These agencies recognize the serious impact of Hurricane Helene on the customers and operations of many financial institutions and will provide appropriate regulatory assistance to affected institutions subject to their supervision. The agencies encourage institutions operating in the affected areas to meet the financial services needs of their communities.

The statement addressed agency views on lending, temporary facilities, publishing requirements, regulatory reporting requirements, and potential CRA consideration for certain financial institutions' efforts.

For more information, refer to the Interagency Supervisory Examiner Guidance for Institutions Affected by a Major Disaster, which is available as follows:

• State Financial Regulators
• FDIC
• FRB
• OCC
• NCUA

The FDIC yesterday issued FIL-70-2024 with guidance to help financial institutions and facilitate recovery in areas affected by Hurricane Helene in Florida, Georgia, North Carolina, and South Carolina, on September 23, 2024, and continuing.

The OCC has released its bank supervision operating plan for fiscal year (FY) 2025. The plan outlines the OCC’s supervision priorities and objectives for the year. It also facilitates the implementation of supervisory strategies for individual national banks, federal savings associations, federal branches and agencies of foreign banking organizations, and third-party service providers subject to OCC examination. OCC staff uses this plan to guide its supervisory priorities, planning, and resource allocations.

Heightened focus areas include:

• Financial
  • Credit
  • Allowance for credit losses
  • Asset and liability management
  • Capital
  • Climate-related financial risks for banks with over $100 billion in total consolidated assets
• Operational
  • Cybersecurity
  • Enterprise change management
  • Operations
  • Third-party risks
  • Payments
• Compliance
  • Bank Secrecy Act/anti-money laundering/countering the financing of terrorism and Office of Foreign Assets Control
  • Consumer compliance
  • Community Reinvestment Act
  • Fair lending