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FILE PHOTO: The Toronto Dominion (TD) bank logo is seen on a building in Toronto, Ontario, Canada March 16, 2017.
TD Bank guilty of money laundering
Two US subsidiaries of Canada’s second-biggest bank agreed last week to pay $3 billion US in fines, pleading guilty to conspiring to money laundering in the United States and giving the bank a huge black eye.
US regulators imposed an asset cap and other business limitations, unusual steps that underline the seriousness of the violations.
Senior executives at the bank joked about money laundering and failed to maintain controls to prevent criminals from using the bank during an aggressive expansion in the United States, the US Justice Department said.
The bank allowed one criminal based in Queens, New York, David Sze, to move more than US$470 million through TD over three years, depositing large amounts of cash into accounts opened by other people. Sze bribed bank officials while laundering revenue from narcotics and other illicit activities.
The decade-long failure to uncover illegal activity through the bank raises questions about the quality of oversight provided by its board, the Globe and Mail wrote on Wednesday.
TD CEO Bharat Masrani, who has announced plans to retire next year, has called the plea “a sad day in our history.”
TD’s dramatic failure in the United States highlights what experts see as longstanding failings in Canada’s regulatory regime regarding money laundering.
A person walks past a sign for TD Canada Trust in Toronto, Ontario.
TD needs a new plan
As ConocoPhillips invested in Canada, Toronto Dominion, one of Canada’s biggest banks, struggled to outline a new expansion strategy after its planned acquisition of Tennessee-based First Horizon fell through amid reports of regulatory difficulties. Instead of expanding all at once by buying First Horizon, TD plans to open more branches in the United States, 150 by 2027.
The failed acquisition looks like a setback for TD, since they will expand in the US more slowly than planned. But overall the Canadian banking sector, which is dominated by five big players, looks stable when compared with the creeping crisis in the United States, where three banks — First Republic Bank, Silicon Valley Bank, and Signature (representing about $559 billion in assets) — have failed this year.
The fallout from US bank failures has had an impact on Canadian banks, pushing them to be more cautious about lending amid fears of a recession. Canada has not had a bank failure since 1996 and was spared the worst of the financial crisis of 2008 because there are a smaller number of more heavily regulated banks than in the United States.