For well over a year, Bay Street wondered what TD had done to find itself at the heart of a U.S. money laundering probe. After a long, mysterious wait, we’ve got some answers.
Driving the news: A U.S. Justice Department probe into TD Bank is reportedly tied to the drug trafficking operation of a Chinese crime group that laundered at least US$653 million in profits from the sale of illegal narcotics, including fentanyl, at U.S. banks.
- According to court documents, U.S. investigators tailed suspects in the money laundering operation as they deposited large bags of cash across different banks in New York.
- TD eventually became the focus of the investigation when law enforcement officials discovered the suspects used multiple branches of the bank and, in at least one case, successfully bribed an employee, according to The Wall Street Journal.
Catch-up: The Canadian lender’s US$13.4 billion acquisition of U.S. bank First Horizon was called off last year because of regulators' concerns with the bank's approach to reporting suspicious activity, which they claimed was lax.
- TD announced last week that they had set aside $450 million to pay fines related to the U.S. probe and were fully cooperating with U.S. officials, but admitted that the full extent of the penalties is still up in the air.
- On top of its troubles south of the border, TD was also fined $9.2 million in Canada last week for failing to report suspicious transactions related to money laundering.
Why it matters: With one American acquisition already scuttled and heavy penalties still on the horizon, the future of Canada’s second-largest lender in the U.S. is looking bumpier.
- The failed First Horizon acquisition and pending penalties have forced TD to expand by opening new branches, a move experts say will set its growth plan back by several years.
Zoom out: TD isn’t the only Canadian bank in the money laundering dog house. RBC and CIBC have both been fined by Canada’s financial watchdog for similar issues, adding to Canada’s unfortunate reputation as a go-to spot for criminals' money.—LA