TD Bank Faces Record AML Penalty in Canada Amid Regulatory Scrutiny and U.S. DOJ Investigation

TD Bank, Canada's second-largest lender, is facing the prospect of a substantial monetary penalty from the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) following an inspection that uncovered deficiencies in its anti-money laundering (AML) controls. The examination, conducted by FINTRAC in late 2023, deemed the bank's AML compliance as unsatisfactory, and the impending penalty is expected to surpass C$10 million ($7.44 million), potentially marking the largest fine ever imposed on a Canadian financial institution by the nation's anti-money laundering agency.

According to sources cited by The Globe and Mail newspaper, the regulatory scrutiny has intensified, and TD Bank could face significant consequences for the alleged shortcomings in its AML controls. The specific nature of the deficiencies identified by FINTRAC has not been disclosed, but the potential financial penalty underscores the gravity of the regulatory concerns.

In response to the findings, TD Bank has expressed its commitment to enhancing its AML program. The bank has taken proactive measures by appointing new executives and advisers to spearhead these efforts. In a statement, TD Bank emphasized its ongoing collaboration with law enforcement and regulators, including FINTRAC, to combat criminal activities and strengthen its AML framework.

Despite FINTRAC's readiness to impose the penalty, the agency has refrained from disclosing detailed information about the compliance actions against the specific business, adhering to regulatory constraints.

This development occurs against the backdrop of increased regulatory scrutiny on financial institutions, with FINTRAC intensifying its monitoring activities after the federal government granted new powers related to national security. Last month, FINTRAC took unprecedented action by imposing fines on two other major Canadian banks, Royal Bank of Canada and CIBC, totaling approximately C$9 million. The penalties were attributed to violations, including the failure to submit suspicious transaction reports, marking the first instance of such enforcement against prominent banks in the country.

In addition to the FINTRAC penalty, TD Bank is reportedly under investigation by the U.S. Department of Justice concerning its AML practices. This scrutiny follows the cancellation of the bank's First Horizon acquisition. The concurrent challenges faced by TD Bank underscore the growing regulatory emphasis on financial institutions to ensure robust AML controls and compliance with evolving regulations, both domestically and internationally.

By fLEXI tEAM