Emily Brafman – On October 10, 2024, the Department of Justice (DOJ) announced that TD Bank has historically become the largest U.S. financial institution to plead guilty to failing to uphold anti-money laundering (AML) standards under the Bank Secrecy Act (BSA), failing to file accurate Currency Transaction Reports (CTRs), and engaging in money laundering. This plea agreement follows an extensive investigation conducted in collaboration with the Federal Reserve Board (FRB), Office of the Comptroller of the Currency (OCC), and Financial Crimes Enforcement Network (FinCEN). The investigation uncovered a decade of intentional and systemic failures in the bank’s AML program, which enabled hundreds of millions of “dirty money” to flow through the bank.
As part of a coordinated resolution, TD Bank has agreed to pay over $3 billion in penalties, with over $1.8 billion directed to the DOJ– the largest penalty ever imposed under the BSA. In addition to the financial penalties, TD Bank has committed to a significant restructure of its compliance program, the retention of an independent compliance monitor for three years, a five-year probationary period, and restrictions on opening new branches, issuing dividend payments, and expanding operations.
Under the BSA, banks are required to maintain risk-based AML programs designed to detect and deter money laundering and other illicit activities. These programs must be tailored to effectively monitor their customer base and report suspicious activity as mandated. This includes reporting currency transactions over $10,000 conducted by or for a single person, as well as multiple currency transactions exceeding $10,000 in total within the same day. AML programs must further include policies, procedures, and controls that address emerging and evolving risks, including those associated with new products, services, and patterns of criminal activity.
Despite these stringent regulations, TD Bank exhibited “long-term, pervasive, and systemic deficiencies” in its AML policies, procedures, and controls for nearly a decade. The bank failed to take remedial action despite repeated warnings from federal regulators and its internal audit group. Instead, TD Bank adhered to a “flat cost paradigm” that prevented annual budget increases for its AML program. As a result, the bank failed to allocate the resources necessary to match its growing profits and exposure to financial risks. Consequently, TD Bank left vast portions of its transaction volume unmonitored, including all domestic automated clearinghouse (ACH) transactions, most check activity, peer-to-peer transactions, and activities involving high-risk countries– amounting to roughly 92% of total transaction volume, or $18.3 trillion. Nonetheless, TD Bank continued to launch new products and services, such as Zelle, without the ability to monitor any of these new services properly. Since the integration of Zelle, customers transferred over 75 billion dollars of unmonitored funds through the platform.
According to the plea agreement, bank employees often joked about the lack of compliance, describing the bank as an “easy target” and “convenient” for the “bad guys.” And sure enough, TD Bank’s willful oversight enabled three money laundering networks to collectively transfer more than $670 million through TD Bank accounts between 2019 and 2023. In one scheme, criminals bribed TD Bank employees with $57,000 in gift cards to ensure their transactions were processed. These employees then failed to file reports for these suspicious transactions as required, even though the deposits regularly exceeded $10,000. In another scheme, five insider TD Bank employees opened new accounts and issued dozens of ATM cards to criminals, facilitating the laundering of $39 million. TD Bank’s guilty plea serves as a warning to other financial instructions: compliance with AML regulations is not optional, and failure to uphold these obligations will result in severe financial and legal consequences. The DOJ and other regulatory agencies are increasing pressure on banks to strengthen their internal controls, monitor high-risk accounts more diligently, and proactively detect and report suspicious activities. Ignorance is not an excuse. Attorney General Lisa Monaco stated, “Every bank compliance official in America should be reviewing today’s charges as a case study of what not to do … Because if the business case for compliance wasn’t clear before — it should be now.”
