TD Bank’s alleged ties to money laundering

TORONTO –

TD Financial institution Group may very well be hit with extra extreme penalties than beforehand anticipated, says a banking analyst, after a report that the investigation it faces within the U.S. is tied to laundering illicit fentanyl income.

Nationwide Financial institution analyst Gabriel Dechaine mentioned in a observe that the worst-case situation of the a number of U.S. investigations TD faces wants reassessing after the Wall Avenue Journal reported the hyperlink on Thursday.

The newspaper mentioned the U.S. Justice Division investigation is targeted on how Chinese language drug traffickers allegedly used TD to launder at the least US$653 million, and bribed TD workers to take action.

TD didn’t immediately verify the report, however mentioned its anti-money laundering defences had been poor.

“Criminals relentlessly goal monetary establishments to launder cash and TD has a duty and an obligation to thwart their criminal activity,” mentioned chief govt Bharat Masrani in a late Friday assertion. 

“I remorse that there have been critical cases the place the financial institution’s AML program fell quick and didn’t successfully monitor, detect, report or reply. That is unacceptable and never in step with our values.”

The financial institution mentioned a complete overhaul of its program is properly underway, with over $500 million already spent in program remediation and platform enhancements. 

The severity of the allegations means TD couldn’t solely face fines properly above the $500 million to $1 billion that many traders have anticipated, but in addition extra extreme regulator-imposed limitations on its enterprise actions, mentioned Dechaine.

“We consider traders must put higher weight on worst-case situations for the inventory,” he mentioned in a observe.

The cumulative fines may simply hit $2 billion, whereas regulators may put in place restrictions, together with limits on its stability sheet development, that would have an effect on financial institution operations for years, mentioned Dechaine.

In a worst-case situation, the problem may erode TD’s future earnings potential by greater than $1 billion, he mentioned, and he has dropped his worth goal for the financial institution’s TSX-listed shares by virtually 9 per cent to $84. 

The hyperlink to drug trafficking comes the identical week TD introduced it had taken an preliminary provision of US$450 million in connection to the continuing U.S. regulatory inquiry into its anti-money laundering compliance program.

The financial institution mentioned on Tuesday its discussions with three U.S. regulators and the Division of Justice are ongoing, and it anticipates extra monetary penalties.

Individually, Canada’s financial-crime watchdog Fintrac levied a $9.2-million penalty towards the financial institution on Thursday for non-compliance with cash laundering and terrorist financing measures.

TD Financial institution’s inventory worth fell virtually six per cent to $74.80 Friday on the Toronto Inventory Alternate.

This report by The Canadian Press was first revealed Could 3, 2024.