TD Bank Faces Allegations of Prior Knowledge on AML Inquiry and Money Laundering Charges, Impacting Acquisition Plans

TD Bank in Canada is alleged to have known about a U.S.-led anti-money laundering (AML) inquiry six months before publicly disclosing the matter, according to recent claims. This revelation comes alongside analysts estimating potential fines ranging from $500 million to $1 billion related to the investigation led by U.S. prosecutors. Simultaneously, a staff member in New Jersey has been charged with creating shell companies and aiding money laundering for a Colombian drug gang. The U.S. Department of Justice's investigation found that millions of dollars were laundered to Colombia through accounts opened by the TD Bank employee since early 2022.

The controversy surrounding the AML inquiry has disrupted TD Bank's acquisition of Tennessee-based First Horizon Bank. Executives at TD reportedly knew about the U.S. DOJ probe more than six months before publicly disclosing it. The bank's share price experienced a 4.4% decline, partly attributed to the ex-dividend date.

The acquisition of First Horizon was announced in February 2022, but by November of the same year, TD executives were reportedly aware of AML process failures significant enough to jeopardize regulatory approval. Meanwhile, a former TD bank employee in New Jersey, Oscar Marcelo Nunez-Flores, has been charged with accepting bribes to create shell companies and issue debit cards to customers in Colombia, facilitating the laundering of millions of dollars to the country.

TD Bank is cooperating with the U.S. DOJ investigation, and a spokesperson stated, "In respect of the recent charges of a TD branch employee in New Jersey, TD is cooperating fully with the law enforcement, and this employee has been terminated." The U.S. Internal Revenue Service - Criminal Investigation is also involved in the probe.

Since the termination of TD's acquisition of First Horizon in May, investors have awaited details on the regulatory issues that led to the transaction's cancellation. In August, TD disclosed in its third-quarter earnings results that it expected fines or penalties related to investigations into its anti-money laundering practices by regulators and law enforcement agencies, including the Department of Justice. The bank also faces a lawsuit from certain First Horizon shareholders, accusing TD's executives of making misleading statements about the deal. TD asserts it has rigorous processes for disclosure and acts in the best interests of the bank and shareholders.

By fLEXI tEAM