TD Bank is under investigation after Justice Department agents discovered a money laundering operation through the bank associated with illicit fentanyl.
Agents discovered that millions of dollars in illicit funds in New York and New Jersey came through the bank, according to court documents seen by the Wall Street Journal and sources familiar with the matter. The DOJ alleges that criminals bribed TD employees, according to the Journal.
The investigation into TD was born out of a 2021 criminal case in which federal prosecutors charged Queens, N.Y.-based Da Ying Sze with coordinating a scheme that laundered at least $653 million in proceeds from illegal drugs, according to court documents seen by the Journal.
DOJ agents had followed members of Sze’s group during their investigation. In one day, Sze’s team stopped at three separate TD branches, and DOJ prosecutors allege Sze and others provided gift cards and other bribes worth at least $57,000 to bank employees.
Sze’s organization laundered funds by buying cashier’s checks and wiring funds to thousands of individuals in the U.S., Hong Kong, and other places, the DOJ said.
Sze pleaded guilty in 2022. Fentanyl has killed more than 150 people per day since 2021, per Centers for Disease Control and Prevention data.
The bank is cooperating with law enforcement and regulators, a spokesperson told Banking Dive. Criminals routinely seek to launder money through banks, she said, and TD’s system didn’t spoil their efforts.
“This is unacceptable, and we must and we will do better,” she said. “As previously disclosed, we have been and continue to cooperate with law enforcement and our regulators. A comprehensive effort is underway to strengthen our AML program, including investments in talent, tools and technology.”
The DOJ investigation into TD is being led by the U.S. Attorney’s Office in New Jersey, sources told the Journal. The U.S. Attorney’s Office in New Jersey declined to comment to the Journal.
National Bank of Canada analysts led by Gabriel Dechaine wrote in a note to clients following the Journal’s report Thursday that “[t]he allegations against TD lead us to assess more severe ‘worst-case’ scenarios than what we previously contemplated,” according to Bloomberg.
Dechaine’s analysis of the news of the DOJ probe “suggests that these issues might not only result in a much larger fine than initially contemplated … but they could also have longer-term implications for TD’s financial performance.”
The fine could be about $2 billion, rather than a previously expected amount between $500 million to $1 billion, analysts said.
A spokesperson told Bloomberg that the bank has the capital, liquidity and capacity “to fund the critical effort currently underway to strengthen its AML program, invest in the business and continue to serve its customers and clients with excellence.”
In addition to the DOJ investigation, the bank is facing three other anti-money laundering probes in the U.S., one of which it plans to resolve with a $450 million set-aside, it said Tuesday.
Canada’s banking regulator, the Financial Transactions and Reports Analysis Centre of Canada, also imposed a $9.2 million CAD ($6.7 million USD) fine on TD for AML reasons this week, including failure to take the prescribed measures for high risk and failure to assess and document money laundering and terrorist activity financing risks.
“Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime is in place to protect the safety of Canadians and the security of Canada’s economy,” said Sarah Paquet, FINTRAC director and CEO, in a prepared statement. “FINTRAC will continue to work with businesses to help them understand and comply with their obligations under the Act. We will also be firm in ensuring that businesses continue to do their part and we will take appropriate actions when they are needed.”
TD’s AML woes have cost the bank big in the past. Regulator concerns over how it monitored suspicious transactions killed its agreement last year to buy First Horizon Bank. First Horizon is headquartered in Tennessee, and TD has been actively seeking expansion in the Southeast region.
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