FORWARDING FROM THE FINANCIAL CRIMES ENFORCEMENT NETWORK: FinCEN Assesses Record $1.3 Billion Penalty against TD Bank

FORWARDING FROM THE FINANCIAL CRIMES ENFORCEMENT NETWORK

FinCEN Assesses Record $1.3 Billion Penalty against TD Bank

WASHINGTON — The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) assessed a record $1.3 billion penalty against TD Bank, N.A. and TD Bank USA, N.A. (collectively, TD Bank, or the Bank) for violations of the Bank Secrecy Act (BSA), the primary U.S. anti-money laundering (AML) law that safeguards the financial system from illicit use. TD Bank is among the largest banks in the United States.

FinCEN’s $1.3 billion settlement is the largest penalty against a depository institution in U.S. Treasury and FinCEN history. FinCEN’s action also imposes a four-year independent monitorship to oversee TD Bank’s required remediation.

“The vast majority of financial institutions have partnered with FinCEN to protect the integrity of the U.S. financial system. TD Bank did the opposite. From fentanyl and narcotics trafficking, to terrorist financing and human trafficking, TD Bank’s chronic failures provided fertile ground for a host of illicit activity to penetrate our financial system,” said Deputy Secretary of the Treasury Wally Adeyemo. “Our historic action represents a significant step in safeguarding our country and communities from criminal activity like fentanyl and human trafficking by requiring TD Bank to fix the vast deficiencies in its safeguards against money laundering. The Biden-Harris Administration is committed to taking action to keep our communities safe from the sort of behavior facilitated by illicit finance and enabled by TD Bank’s lax oversight, and we are making clear that financial institutions will face severe repercussions if they fail to maintain necessary safeguards.”

“For over a decade, TD Bank allowed its AML program to languish, making TD Bank a target for illicit actors—including its own employees,” said FinCEN Director Andrea Gacki. “The magnitude of FinCEN’s action is consistent with the harm that TD Bank’s failures caused. This historic action should serve as a powerful reminder that we will not tolerate financial institutions who flagrantly violate their obligation to safeguard our financial system from criminal activity.”

As part of the settlement, TD Bank admits that it willfully failed to implement and maintain an AML program that met the minimum requirements of the BSA and FinCEN’s implementing regulations. FinCEN’s investigation revealed that TD Bank knew that its AML program was neither appropriately designed nor adequately resourced to mitigate the actual illicit finance risks that it faced on multiple fronts. Among other failures, TD Bank’s processing of peer-to-peer transactions (e.g., Venmo and Zelle), including transactions indicative of human trafficking, was insufficient, and as a result, TD Bank failed to identify and timely report these transactions to FinCEN. TD Bank also allowed significant backlogs of potentially suspicious activity to persist, thereby depriving law enforcement of necessary information. TD Bank knew that it was the subject of significant funnel account activity involving high-risk countries yet failed to take timely action to address this substantial risk.

TD Bank also failed to timely detect suspicious activity involving its own employees. For example, in 2021, a TD Bank employee facilitated the laundering of narcotics proceeds in exchange for bribes. This employee opened numerous accounts, including for shell companies, that then engaged in millions of dollars’ worth of funnel account activity in a high-risk jurisdiction where TD Bank maintained no operations. TD Bank knew that this type of activity was not subject to appropriate controls and failed to mitigate this glaring risk.

As a result of these failures, TD Bank allowed trillions of dollars in transactions annually to go unmonitored for potentially suspicious activity that would require reporting to FinCEN. Specifically, during the time period covered by the Consent Order, TD Bank willfully failed to file Suspicious Activity Reports (SARs) on thousands of suspicious transactions—totaling approximately $1.5 billion. Additionally, TD Bank’s Currency Transaction Reports (CTRs) of large cash transactions were often delayed, and, in some instances, misleading to law enforcement.

TD Bank failed to properly limit or report suspicious transactions and cash activity that included substantial criminal activity, as further detailed in the Consent Order. For example, from 2017 to 2021, TD Bank facilitated over $400 million in transactions for Da Ying Sze (Sze), who pled guilty to money laundering in 2022 for his role in conspiring to hide proceeds of narcotics trafficking. Sze conducted most of these transactions in large sums of cash (often in bags that Sze brought into TD Bank branches), yet the Bank failed to timely limit or restrict Sze’s activity. TD Bank failed to timely file SARs on a substantial portion of this activity and also failed to identify Sze in more than 500 CTRs totaling more than $400 million, which hindered FinCEN and law enforcement.

TD Bank has agreed to engage an independent consultant, who, under the auspices of FinCEN’s monitor, would conduct a historical analysis of TD Bank’s transaction data, often referred to as a “SAR lookback,” to remediate the SAR filings that TD Bank missed due to its extensive control gaps. TD Bank has also agreed that the monitor will oversee an independent, end-to-end review of its AML Program. For the first time, FinCEN is imposing accountability and data governance reviews. The accountability review will independently assess the involvement or failure to escalate by TD Bank personnel in conjunction with certain conduct described in the Consent Order’s Statement of Facts. The accountability review will provide corresponding recommendations to the Bank, including recommendations related to the culture of compliance at TD Bank. The data governance review will help to ensure that TD Bank identifies and fixes the root causes of many gaps in its AML program.

The Department of Justice, the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve System will also announce settlements in parallel investigations today.

FinCEN’s Enforcement and Compliance Division is responsible for investigating serious violations of the BSA. For additional information regarding the facts and circumstances associated with this enforcement action, including the specific BSA violations and their underlying causes, please see the Consent Order between FinCEN and TD Bank.

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