TD Bank to Pay Record $3 Billion for BSA/AML Violations
Late last week, the Financial Crimes Enforcement Network (FinCEN) assessed a record $1.3 billion penalty against TD Bank for violations of the Bank Secrecy Act (BSA) and FinCEN’s implementing regulations. The bank also pleaded guilty and agreed to pay over $1.8 billion in penalties to resolve the Justice Department’s investigation into BSA violations and money laundering. So, what went so terribly wrong?
As part of the settlement, TD Bank admitted that it willfully failed to implement and maintain an anti-money laundering (AML) program that met the minimum requirements of the BSA and FinCEN’s 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.” Further, TD Bank’s violations presented “significant risk of serious harm to the U.S. financial system.”
According to the consent order, AML senior management at TD Bank knew that its failure to adequately support AML compliance created backlogs that allowed illicit transactions to continue to flow through the bank. Instead of correcting compliance deficiencies, AML senior management chose to only “gradually reduce” its lengthy queues of alerts and investigations leading to delayed reporting, account closures, etc. Notably, the bank:
• Allowed trillions of dollars of domestic ACH, remote deposit capture, and peer-to-peer (P2P) transactions to go unmonitored for over a decade. AML senior management knew that the lack of monitoring presented illicit finance risks, especially with regard to P2P transactions.
• Improperly overlooked the money-laundering risks presented by customer relationships involving high-risk jurisdictions, such as Colombia, Cuba, and China. In opening accounts for these high-risk customers, TD Bank did not adequately mitigate risks associated with, among other things, funnel accounts and money laundering. Once accounts were opened and funnel activity was identified, TD Bank knowingly failed to timely mitigate the risks stemming from these flows.
• Failed to timely identify the involvement of branch employees in suspicious activity. Certain TD Bank employees facilitated the movement of substantial sums of illicit funds through the U.S. financial system, including hundreds of millions of dollars related to numerous criminal prosecutions.
• Allowed significant backlogs of potentially suspicious activity to persist. The bank not only failed to timely file Suspicious Activity Reports with, but many SAR filings “were so inaccurate that they were misleading to law enforcement and severely hindered financial crime investigation.”
These admissions only scratch the surface of the 99-page consent order. As part of coordinated resolution with the Justice Department, Federal Reserve Board, OCC and FinCEN, TD Bank also pleaded guilty to conspiring to fail to maintain an AML program that complied with the BSA, and conspiring to fail to file accurate Currency Transaction Reports (CTRs).
“By making its services convenient for criminals, TD Bank became one,” said Attorney General Merrick B. Garland. “TD Bank also became the largest bank in U.S. history to plead guilty to Bank Secrecy Act program failures, and the first US bank in history to plead guilty to conspiracy to commit money laundering.”
I’ll finish this post with a final caution worth noting from Deputy Attorney General Lisa Monaco:
“For years, TD Bank starved its compliance program of the resources needed to obey the law. Today’s historic guilty plea, including the largest penalty ever imposed under the Bank Secrecy Act, offers an unmistakable lesson: crime doesn’t pay — and neither does flouting compliance,” she said. “Every bank compliance official in America should be reviewing today’s charges as a case study of what not to do. And every bank CEO and board member should be doing the same. Because if the business case for compliance wasn’t clear before — it should be now.”
