TD Banks’ complete compliance disaster was reflected in every aspect of TD Bank’s business and compliance operations. It is not surprising that TD Bank’s deficient BSA and AML compliance program was known by its Board of Directors and senior leadership. TD Bank’s priority on business — even illegal business — outweighed all interest in implementing and maintaining an effective BSA and AML compliance program.
As usual in these stories, money and business ruled the day — legal and compliance and government enforcement risks were ignored in favor of business, resulting in TD Bank’s processing of over $671 million in illegal proceed, most of which were generated from illegal drug transactions.
TD Bank’s complete compliance failure included pervasive knowledge and awareness and a massive load of red flags that were unaddressed and ignored. TD Bank suffered a string of regulatory enforcement actions, received numerous reports from Internal Audit and third-party consultants confirming what everyone already knew — TD Bank’s BSA and AML controls were defective.
On top of these significant problems, TD Bank furthered its criminal mindset and activity by imposing what it called a “flat cost paradigm” across operations to hinder remediation of TD Bank’s transaction monitoring and other compliance functions. Further, TD Bank experienced rapid growth in volume of business and attendant risks and deliberately failed to update its BSA and AML program.
These failures enabled, among other things, three money laundering networks to launder over $600 million in criminal proceeds, and created vulnerabilities that allowed five TD Bank store employees to open and maintain accounts for one of the money laundering networks. These five TD Bank employees ultimately conspired with criminal organizations to open and maintain accounts at the Bank that were used to launder $39 million to Colombia.
Board and Senior Level Knowledge of BSA and AML Deficiencies
TD Bank’s Board and senior level executives including high-ranking compliance officials knew there were long-term, pervasive, and systemic deficiencies in TD Bank’s AML policies, procedures, and controls. TD Bank did not update its system despite increases in the volume and risk of its business and significant changes in the nature and risk of transactional activity. At bottom, TD Bank monitored only approximately 8% of the volume of transactions because it omitted all domestic automated clearinghouse (“ACH”) transactions, most check activity, and numerous other transaction types from its automated transaction monitoring system.
On paper, TD Bank’s program touched all the essential elements of an effective BSA and AML compliance program. However, in practice, TD Bank’s compliance program was starved, hamstrung and ignored in favor of business.
Regulatory Enforcement, Internal Audit and Consultant Reports of Deficiencies
Throughout the last ten years, the OCC, FinCEN, Internal Audit and third-party consultants repeatedly identified TD Bank’s transaction monitoring program as an area of concern. The senior executive leadership and boards of directors were made aware of certain of the concerns identified by these regulators and auditors. Yet, nothing was done to address these concerns or mitigate reported risks.
In 2013, the OCC and FinCEN announced enforcement actions against TD Bank carrying a combined civil monetary penalty of $37.5 million for violations of the BSA. Five years later, in 2018, the OCC characterized TD Bank’s planning, delivery, and execution of AML technology systems and solutions as insufficient. In that same year, Internal Audit determined that TD Bank’s high-risk jurisdiction transaction monitoring scenarios were using an outdated list of high-risk jurisdictions, meaning the bank’s scenarios were not designed to generate alerts on the jurisdictions currently deemed to be high risk. Two years later, in 2020 Internal Audit identified numerous TD Bank’s AML compliance deficiencies related to the governance and review of transaction monitoring scenarios. TD Bank also engaged third-party consultants who identified fundamental weaknesses in the Bank’s AML program, which were reported to senior leadership in 2018, 2019 and 2021.
Despite all of these occasions when TD Bank was made aware of BSA and AML deficiencies, reports of compliance deficiencies, and regulatory enforcement actions, TD Bank made no effort to improve its transaction monitoring system.
TD Bank’s self-imposed budget restrictions, which was referred to as a “flat cost paradigm” or “zero expense growth paradigm,” meaning that the compliance budget was expected to remain flat year-over-year, despite consistent growth in TD Bank’s global revenue. TD Bank knew that budgetary restrictions led to systemic deficiencies in the bank’s transaction monitoring program and exposed the Bank to potential legal and regulatory consequences. At certain points throughout the relevant period, TD Bank postponed or cancelled proposed improvements to its transaction monitoring program, often to reduce AML costs.
TD Bank’s Culture of Neglect and Embrace of Criminal Money Laundering
TD Bank’s culture of neglect permeated every aspect of its operations. Employees openly referred to TD Bank’s embrace of criminal money laundering elements complain
In October 2021, when asked by a colleague what “the bad guys” thought about TD Bank’s AML program, an AML technologist and a global AML manager summarized the program as follows:
Technologist: what do the bad guys have to say about us
GAML Manager: Lol
Manager: Easy target
Technologist: damnit
Manager: Old scenarios; old CRR ; tech agility is poor to react to changers
Manager: Bottomline we have not had a single new scenario added since we first implemented SAS due to various issues with the install
