Two units of TD Bank have pleaded guilty to U.S. criminal charges and agreed to pay a combined $3 billion in fines to resolve the federal government’s money laundering investigations, U.S. authorities said Thursday.
The plea deal includes an asset cap and other restrictions on her business, authorities said. The Justice Department said the bank pleaded guilty to conspiracy to launder money and conspiracy to fail to file accurate reports or maintain a compliant anti-money laundering program.
The asset cap, imposed by the Office of the Comptroller of the Currency, is a rare step usually reserved for extreme cases. It would deal a major blow to TD, which has sought to expand further in the United States, which accounts for about a third of the bank’s income.
TD also agreed to pay $3 billion in combined penalties to US banking regulators, the Department of Justice and the Treasury Department’s Financial Crimes Enforcement Network.
The deal resolves investigations by the Department of Justice, the Office of the Comptroller of the Currency, and the Treasury Department’s Financial Crimes Enforcement Network. It also includes imposing independent oversight.
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The asset cap is a “worst case scenario” for TD, Cormark Securities analyst Lemar Persaud said before details of the plea deal were announced. The bank has already allocated $3 billion for the fine.
Persaud compared Wells Fargo, which has an asset cap of $1.95 trillion after a fake accounts scandal, which restricted its profits. The asset cap will also constrain TD’s profits but to a lesser extent than it did with Wells Fargo, he said.
Persaud said the investigation into TD led to “significant underperformance of the stock and, we believe, the retirement of current CEO Bharat Masrani.”
TD is the second largest bank in Canada and the tenth largest in the United States. The bank first revealed it was responding to inquiries from regulators and law enforcement last year, just months after closing a $13 billion acquisition of regional lender First Horizon.
A source confirmed that federal authorities began investigating TD’s internal controls after agents discovered a Chinese criminal operation bribing employees and bringing large bags of cash to branches to launder millions of dollars in fentanyl sales through TD branches in New York and New Jersey.
TD has spent millions to bolster its compliance programs, fired dozens of employees at its U.S. branches and appointed Canadian personal banking chief Ray Chun as its new CEO, distancing its new boss from the money laundering scandal.
CEO Masrani, who has been at the helm of the company for nearly a decade and previously led its U.S. operations, will retire next year. Al-Masrani said that he bears full responsibility for the money laundering issues that have plagued the bank.
