TD Bank Faces $3 Billion Fine and US Growth Limitations Over Money-Laundering Failures
Toronto-Dominion Bank (TD) is facing serious consequences in the U.S. after its failure to adequately prevent money laundering activities. According to a report by the Wall Street Journal , TD Bank is expected to pay a hefty $3 billion penalty as part of a settlement with U.S. regulators. This comes on the heels of investigations by the Office of the Comptroller of the Currency (OCC), the Department of Justice, and the Federal Reserve, which revealed lapses in TD's ability to detect and report money-laundering activities at several of its branches, particularly in New York, New Jersey, and Florida.
In addition to the financial penalty, regulators are imposing restrictions on TD's ability to expand its U.S. retail banking operations. The OCC is expected to set a cap on the size of TD's U.S. retail banking assets. This growth limitation could severely impact TD's strategy of expanding its footprint in the U.S. through acquisitions, a model it has relied on for nearly two decades. This brings to mind similar regulatory constraints faced by Wells Fargo in recent years, limiting the size of its balance sheet.
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This penalty doesn’t come as a surprise, as TD had already set aside $3 billion in provisions for the anticipated settlement. However, the asset cap is a major roadblock for the bank, especially since TD's American retail operations contribute to about 25% of its overall revenue, with over 10 million U.S. customers and nearly 1,200 branches. This regulatory action further intensifies doubts about TD’s ability to maintain its aggressive expansion in the U.S.
These legal and financial challenges have had widespread impacts on the bank’s leadership. CEO Bharat Masrani, who announced his retirement last month, had to assume responsibility for these anti-money laundering shortcomings. As he steps down, Raymond Chun, who currently heads TD’s Canadian division, is set to take over the leadership role in April 2024.
This is not the first time TD Bank has faced penalties in the U.S. Recently, the bank agreed to pay over $20 million to settle a Treasuries spoofing case, and separately, another $28 million for providing inaccurate customer data to U.S. consumer reporting agencies. Adding to its troubles, TD also abandoned a $13.4 billion deal to acquire U.S. regional bank First Horizon Corp. last year due to delayed regulatory approvals.
While TD Bank remains a major player in both Canadian and U.S. markets, these regulatory hurdles will likely challenge its strategic
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