TD May Face US$2 Billion Money Laundering Fine, Third-Largest Ever: Analysts

Canada’s second largest bank may have just seen its tiny money laundering problem turn into a big one. TD, also the sixth largest bank in North America, recently disclosed they’ll be setting aside hundreds of millions in funds for any potential fines related to an anti-money laundering (AML) compliance investigation in the U.S.. After a new report outlined further details, including allegations related to transnational fentanyl trafficking and bribery, analysts at Jefferies think they may need to set aside a little more for penalties. Okay, a lottle more—they estimate the bank could be facing a multi-billion dollar fine when all is done, one of the third largest ever issued. 

TD Sets Aside US$450m For Money Laundering Fines, Cooperating With Investigators

In April, TD disclosed it was cooperating with a U.S. Department of Justice (DoJ) investigation into its AML compliance, and it would set aside US$450 million in funds to cover any potential fines that may result. The bank notes the penalties are “… unknown and not reliably estimatable at this time.”

Scarce details, significant capital set aside, and a caveat of being unable to estimate the fines, resulted in the issue appearing insignificant. As more information comes to light, analysts believe the opposite is true—this is a much bigger issue than previously believed to be. 

“Earlier in the week, it was our belief that concerns were approaching an ‘overblown’ status,” wrote John Aiken, an analyst at Jefferies. 

Adding, “However, with the bank allegedly a focal institution in a drug money laundering scheme, the worst case scenario has become more likely with TD potentially entering a lost decade: Growth in the U.S. will likely be constrained and the timeline for a fix is extended by several years.”

Canadian Bank Used By Transnational Gangs To Launder Fentanyl Proceeds

The shift in opinion comes as new details emerge about the issues and extent of the problems the bank is trying to resolve. The WSJ looked into the allegations against the bank, and found they’re linked to “Chinese crime groups” laundering the proceeds of fentanyl sales through the bank.

The allegations are the results of an undercover operation in New York and New Jersey. Prosecutors allege hundreds of millions were laundered through the bank, in some cases via bribery of bank employees, using a new technique which “…  pioneered a trade-based method of laundering cash out of the U.S..” 

The news comes as Canadian investigators recently fined the bank for lapses in AML compliance as well. At the end of April, FINTRAC, the country’s financial intelligence agency, hit TD with a $9 million fine for failing to submit anti-money laundering reports. It may seem like peanuts in contrast to the U.S. fines, but it is one of the largest fines issued by the agency. The bank clarified there’s no reason to believe the lapse in filings resulted in any failure to investigate. 

TD May Face US$2 Billion In Fines, Third-Largest Ever Issued

Aiken believes the extent of the issue may cost a lot more. He believes “simple math” shows the fine may be in excess of US$2 billion, which would make it the third-largest ever issued. The huge estimate is due in part to the extent of the issue, and the extended timeline to fully implement systems to prevent further lapses.

Jefferies believes the firm is well capitalized and able to absorb the losses without any critical issues. However, he does believe the size of fine can turn TD’s aggressive American expansion plans into a lost decade for the bank.

Full details of the American allegations have yet to be revealed, but Canada is no stranger to laundering fentanyl cash through its financial initiations. In fact, it’s such a common tactic that anti-money laundering experts have dubbed a technique the “Vancouver model.” 

The Vancouver Model is a technique where the proceeds of fentanyl laundering and other illicit activities are cleaned through casinos, before further low-scrutiny investment activity is used to layer the funds, such as obtaining mortgages, flipping homes, and then claiming the “profits” as legitimate activity. It’s one of the issues that initially helped inflate Canadian home prices, even before immigration growth took off.

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  • Ron Bruce 1 month ago

    If you Bank at TD Bank and other financial institutions that were recently charged with money laundering, as a client or a depositor, you will pay the fine over time. Interest rates and other benefits for clients and depositors will be less, thanks to the executives who may not be charged under Canada’s Criminal Code.

    Laundering proceeds of crime

    462.31 (1) Every one commits an offence who uses, transfers the possession of, sends or delivers to any person or place, transports, transmits, alters, disposes of or otherwise deals with, in any manner and by any means, any property or any proceeds of any property with intent to conceal or convert that property or those proceeds, knowing or believing that, or being reckless as to whether, all or a part of that property or of those proceeds was obtained or derived directly or indirectly as a result of.

    (a) the commission in Canada of a designated offence; or

    (b) an act or omission anywhere that, if it had occurred in Canada, would have constituted a designated offence.

  • Historian Man 1 month ago

    Canadian Heritage Moment??

  • Trader Jim 1 month ago

    Eagerly awaiting the details of this new measure. Who wants to bet it’s new to them, not so much to Canada?

  • Patrick L 1 month ago

    Hopefully they will keep the fine on the low side, but jail the directors and officers to make the point that it’s not “only money”.

  • BP 1 month ago

    All the other Canadian banks are not innocent in this situation. RBC should be close behind in this investigation as they received a $7,000,000 fine towards their lack of laundering investigating, coupled with their processing of HSBC, which is notorious to be involved in laundering schemes.
    TD is just the start of unraveling the sh!tstorm that’s going to possibly be the thing that breaks in the geopolitical sphere and finally starts the much needed recession.

  • Bob Notrob 1 month ago

    Just the RW being the RW, the only thing that is new, they got caught.

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