TD Bank hit with $9.2M penalty after failing to report suspicious transactions

Canada’s financial-crime watchdog has levied a $9.2-million penalty against The Toronto-Dominion Bank for non-compliance with money laundering and terrorist financing measures as the bank also faces compliance investigations in the U.S. 

The penalty by the Financial Transactions and Reports Analysis Centre of Canada, or Fintrac, comes after it imposed a $7.5-million fine against RBC and a $1.3-million fine against CIBC, both of which were announced in December. Those penalties were also for non-compliance issues related to money laundering and terrorist financing.

The penalty against TD is for five violations during a review between March 1, 2022 and March 31, 2023, the agency said.

The failures include not submitting suspicious transaction reports when there was reasonable grounds to require it to do so, including negative media related to the clients, not assessing and documenting money laundering or terrorist activity financing risks and for the bank not taking prescribed special measures for high risk.

During its review Fintrac identified 96 clients who were not entered into the bank’s high-risk client program, including a politically exposed foreign person who was able to transact for more than two years without the bank obtaining required details from the client. 

TD is working to improve, said spokeswoman Lisa Hodgins in a statement.

“As part of their regular review of Canadian financial entities, FINTRAC identified five specific administrative findings that require our attention. Improvements have been made and more are underway.” 

The penalty against TD comes only days after the bank disclosed it had taken an initial provision of US$450 million in connection to the ongoing U.S. regulatory inquiry into its anti-money laundering compliance program.

The bank said on Tuesday its discussions with three U.S. regulators and the Department of Justice are ongoing, and it anticipates additional financial penalties.

TD said its program was “insufficient to effectively monitor, detect, report, and respond to suspicious activity” and work is underway to remedy the deficiencies.

National Bank analyst Gabriel Dechaine said total penalties could exceed market expectations of somewhere in the $500 million to $1 billion range, while the bank also faces risks that regulators issue consent orders that could mean further restrictions. 

At the bank’s AGM last month, TD chief executive Bharat Masrani asked shareholders to be patient as the bank works to clear the regulatory overhang on the stock. 

“Without a doubt shareholders have some anxiety, as do we, regarding our issue in the U.S., and until there is better clarity, I’m sure there is pressure.”

This report by The Canadian Press was first published May 2, 2024.