TD Financial institution’s alleged ties to cash laundering

TORONTO –

TD Financial institution Group could possibly be hit with extra extreme penalties than beforehand anticipated, says a banking analyst, after a report that the investigation it faces within the U.S. is tied to laundering illicit fentanyl income.

Nationwide Financial institution analyst Gabriel Dechaine stated in a observe that the worst-case state of affairs of the a number of U.S. investigations TD faces wants reassessing after the Wall Road Journal reported the hyperlink on Thursday.

The newspaper stated the U.S. Justice Division investigation is concentrated on how Chinese language drug traffickers allegedly used TD to launder a minimum of US$653 million, and bribed TD staff to take action.

TD didn’t instantly affirm the report, however stated its anti-money laundering defences had been poor.

“Criminals relentlessly goal monetary establishments to launder cash and TD has a accountability and an obligation to thwart their criminal activity,” stated chief government Bharat Masrani in a late Friday assertion. 

“I remorse that there have been severe cases the place the financial institution’s AML program fell brief and didn’t successfully monitor, detect, report or reply. That is unacceptable and never in step with our values.”

The financial institution stated a complete overhaul of its program is effectively underway, with over $500 million already spent in program remediation and platform enhancements. 

The severity of the allegations means TD couldn’t solely face fines effectively above the $500 million to $1 billion that many buyers have anticipated, but additionally extra extreme regulator-imposed limitations on its enterprise actions, stated Dechaine.

“We imagine buyers must put better weight on worst-case eventualities for the inventory,” he stated in a observe.

The cumulative fines may simply hit $2 billion, whereas regulators may put in place restrictions, together with limits on its steadiness sheet development, that would have an effect on financial institution operations for years, stated Dechaine.

In a worst-case state of affairs, the problem may erode TD’s future earnings potential by greater than $1 billion, he stated, and he has dropped his worth goal for the financial institution’s TSX-listed shares by nearly 9 per cent to $84. 

The hyperlink to drug trafficking comes the identical week TD introduced it had taken an preliminary provision of US$450 million in connection to the continued U.S. regulatory inquiry into its anti-money laundering compliance program.

The financial institution stated on Tuesday its discussions with three U.S. regulators and the Division of Justice are ongoing, and it anticipates extra monetary penalties.

Individually, Canada’s financial-crime watchdog Fintrac levied a $9.2-million penalty towards the financial institution on Thursday for non-compliance with cash laundering and terrorist financing measures.

TD Financial institution’s inventory worth fell nearly six per cent to $74.80 Friday on the Toronto Inventory Trade.

This report by The Canadian Press was first revealed Could 3, 2024.