A $3 Billion Mistake

From Neglect to Consequences: A Landmark in AML Enforcement

On October 10, 2024, TD Bank made history—but not the kind any bank wants to be known for. The U.S. Department of Justice, along with the Office of the Comptroller of the Currency (OCC), and the Financial Crimes Enforcement Network (FinCEN), imposed a staggering more than $3 billion penalty on TD Bank for violating anti-money laundering (AML) laws. It’s the largest penalty ever imposed on a bank for failing to comply with the Bank Secrecy Act (BSA), and it’s a case that highlights just how costly non-compliance can be.

For over a decade, TD Bank turned a blind eye to its AML responsibilities, letting over $18 trillion in transactions slip through its systems without proper oversight. These lapses allowed money tied to drug trafficking, terrorist financing, and even human trafficking to flow through the bank undetected. As Deputy Secretary of the Treasury Wally Adeyemo bluntly said, “TD Bank did the opposite” of protecting the U.S. financial system. Instead, the bank’s failures provided a “fertile ground” for criminal activity to thrive.

This case serves as a wake-up call for financial institutions everywhere. TD Bank’s negligence spanned years, and it left the door wide open for illegal transactions to enter the U.S. financial system. As FinCEN Director Andrea Gacki said, “For over a decade, TD Bank allowed its AML program to languish,” making it an easy target for criminals—including its own employees. The consequences are clear: neglecting compliance can cost billions, damage reputations, and shake the very foundation of a financial institution.

What Went Wrong: How TD Bank’s Compliance Failures Unfolded

TD Bank’s massive $3 billion in fines wasn’t just the result of a few missteps—it was caused by years of deep-rooted failures in its AML program. These problems ran across the entire bank, pointing to a culture that prioritized profit over compliance. Here’s what went wrong:

1. Failure to Comply with the Bank Secrecy Act (BSA): TD Bank was found guilty of multiple violations of the BSA, including failing to maintain an AML program that complies with the law. The bank’s AML program didn’t do enough to catch and report suspicious activity, allowing trillions of dollars to move through the system with little oversight. In fact, more than 92% of the bank’s transactions—totaling about $18.3 trillion—went unmonitored between 2018 and 2024, indicating that it became a common conduit for criminal organizations to launder funds.
2. Failure to File Currency Transaction Reports (CTRs): TD Bank also failed to submit accurate Currency Transaction Reports (CTRs), which are required for cash transactions of over $10,000. Instead, the bank either ignored or misreported these deposits. For instance, in one case, employees allowed a high-risk jewelry business to move nearly $120 million through shell accounts without filing the required reports.
3. Laundering Money for Criminal Networks: TD Bank admitted to being involved in money laundering. Its weak internal controls made it a go-to bank for multiple criminal organizations, including drug trafficking and money laundering rings. In one instance, a network laundered over $470 million through nominee accounts, with corrupt bank employees accepting over $57,000 in bribes to help the illicit actors launder money.
4. Customer Due Diligence Systemic Deficiencies: TD Bank also failed to maintain an effective Customer Due Diligence (CDD) process, which is a core pillar of AML compliance. The bank neglected to collect and review key information needed to build an accurate customer risk profile. As a result, high-risk customers were allowed to move significant amounts of money without proper scrutiny, further exposing the bank to illegal activities.
5. Outdated Transaction Monitoring: The bank failed to update its transaction monitoring systems to keep up with emerging risks. From 2014 to 2022, TD Bank didn’t make meaningful improvements, even when new products like digital payments platform Zelle and peer-to-peer payments were introduced. As a result, transactions from high-risk countries and other suspicious activities were overlooked, even in accounts the bank had flagged for closure.
6. Culture of Negligence and Corruption and Lack of Effective Governance: TD Bank’s leadership prioritized profit over compliance. Executives enforced a “flat cost paradigm,” meaning the budget for compliance stayed the same even as the bank’s risk increased. The insufficient resources made the bank a safe haven for criminal activity.

7. A Culture of Non-Compliance: Worse still, the bank fostered a culture where compliance was an afterthought. Employees joked about the lack of controls, and managers looked the other way. In one email, a branch manager laughed off suspicious behavior, saying, “You guys really need to shut this down LOL.” The bank didn’t, and it paid a hefty price for this mindset.

The Consequences: Massive Penalties and Long-Term Impact

The penalties for TD Bank’s actions are not just financial—they’re also operational, with long-term effects on the bank’s ability to grow. Here’s a breakdown of the consequences:

• U.S. Department of Justice: TD Bank agreed to pay $1.4 billion in fines to the DOJ, along with $452.4 million in forfeitures. This nearly $1.9 billion penalty is the largest ever under the Bank Secrecy Act, showing just how serious TD Bank’s violations were.
• Financial Crimes Enforcement Network: FinCEN hit TD Bank with a $1.3 billion civil penalty for failing to maintain an effective AML program. FinCEN Director Andrea Gacki made it clear that the fine matches the level of harm caused by the bank’s failures, which allowed criminal networks to thrive unchecked.
• Office of the Comptroller of the Currency: The OCC imposed a $450 million fine for TD Bank’s violation of banking laws. The OCC also set an asset cap, which limits TD Bank’s asset growth and will likely limit the bank’s plan to open 150 branches by 2027 until it fixes its AML program. If TD Bank fails to comply with the OCC’s order in a timely manner, the OCC has the discretion to reduce the bank’s total consolidated assets by up to 7% for every year the bank is noncompliant with the order, making it an even more severe consequence. TD Bank must also receive OCC authorization before adding new products and services.
• Federal Reserve: The Federal Reserve required TD Bank to pay $123.5 million, which will be credited toward the total forfeiture amount. This focuses on TD Bank’s systemic risk and failure to meet its responsibilities under U.S. banking laws and requires significant remediation of the AML deficiencies identified by U.S. regulators.

Total Financial Penalty

TD Bank faces a total penalty and forfeitures from the DOJ, FinCEN, the OCC, and the Federal Reserve of more than $3.7 billion—the largest AML-related fine in U.S. history. Although the scale of the misconduct is significant, the record penalty is a coordinated effort by multiple government agencies to hold the bank accountable for its serious lapses in compliance.

Ongoing Monitoring and Compliance Remediation

As part of the settlement, TD Bank will be under close watch for the next few years. The bank must retain an independent compliance monitor for at least three years to oversee its AML program and ensure it’s making the necessary changes. TD Bank also agreed to cooperate with ongoing investigations into individuals involved in the misconduct, including both employees and external criminals.