By Rezaul Karim and Rashidul Amin, 10 February 2025
A casual conversation between two TD Bank employees on its workplace instant messaging platform was included in the US Department of Justice (DOJ) case files: ‘why all the really awful ones bank here lol,’ to which a colleague replied, ‘Because… we are convenient’. [1]
What might have seemed like a light-hearted joke in the moment, now appears as an acknowledgment of systemic compliance failure. TD Bank, N.A. (TDBNA), continues to market itself as ‘America’s Most Convenient Bank’ – but what exactly does convenience mean when it comes at the cost of compliance?
‘If you think compliance is expensive, try non-compliance,’ as said by former US Deputy Attorney General Paul McNulty [2]. TDBNA’s historic $3 billion money laundering penalty stands as a clear example of the high cost of non-compliance.
On 10 October 2024, the DOJ announced that TDBNA had agreed to the $3 billion settlement with the US government and pleaded guilty to charges as a result of allowing drug cartels and other criminals to transfer hundreds of millions of dollars in illicit funds using the bank’s network.[3]
The DOJ also stated that TDBNA had ‘long-term, pervasive, and systemic deficiencies’ in its US AML policies, procedures and controls but failed to take appropriate remedial action.’[4] The bank’s senior leadership imposed a budget constraint mandating that the bank’s budget, including the AML budget, not increase year-over-year, despite the bank’s profits and risk levels surging.
What led to TDBNA’s multi-billion dollar penalty?
Multiple money laundering networks took advantage of TDBNA’s weak AML programme. Furthermore, TDBNA failed to update its transaction monitoring programme, despite known gaps, leaving trillions of dollars of customer activity entirely unmonitored. From at least 2014 to 2022, the bank did not make any substantial effort to update its transaction monitoring programme, and risks remained unaddressed by the bank despite escalations raised to the bank’s top management.
Sources revealed that between 2018 and 2024, TDBNA’s automated AML monitoring failed to monitor 92% of transaction volume and 74% of transaction value, which corresponded to over $14.6 billion unmonitored transactions and over $18.3 trillion in unmonitored transaction value, which included a mix of lower- and higher-risk transactions. [5]
The bank’s Global Anti Money Laundering (GAML) function operated under budget constraints as the management strove to maintain a ‘zero expense growth paradigm’, meaning that the budget was expected to remain flat year-over-year despite consistent growth over the years. The bank prioritised the customer experience over an anti money laundering programme.
The bank was also observed to have wilfully failed to file accurate currency transaction reports (CTRs). As cited in the case files, defendant Da Ying Sze, known to TDBNA employees as ‘David’, conspired to launder and transmit over $653 million, of which more than $470 million was laundered through the bank. David even bribed TDBNA employees with more than $57,000 in gift cards in furtherance of the scheme. [6]
Repairing the damage
TDBNA has committed to implementing a transaction monitoring system which complies with current day demands, such as the deployment of artificial intelligence and other sophisticated software into the system.
The bank has already hired over 700 AML specialists and established a Bank Secrecy Act (BSA)/AML oversight committee. Additionally, TDBNA has announced it will look into past transactions to identify any further suspicious activity. [7]
What’s more, the bank has launched a ‘multi-year effort’ focused on implementing robust AML processes with stronger training for its staff across the bank. To put it simply, the bank is aiming to ‘prevent, detect and measure financial crime risk’ including by setting up a proper escalation grid, data driven decision-making and risk mitigation tools and technologies, overseen by a strong AML leadership team.
Final remarks
As TDBNA has agreed in a plea deal with the DOJ and Financial Crimes Enforcement Network (FinCEN), the bank will streamline its entire AML compliance framework and will serve a five-year term of probation and retain a three-year independent monitorship with the DOJ. It has also agreed to a four-year monitorship requirement with FinCEN.
To ensure a safe and secure financial network, all financial institutions including banks could learn a lot from the AML failures of TDBNA. By seemingly falling short on compliance measures, TDBNA has received a record-breaking fine that has not only significantly impacted its finances, but also its reputation.
Yes, the cost of compliance is expensive, but the cost of non-compliance is certainly more expensive, as exemplified in this case. For long term sustainability, investment in compliance is not merely desirable – it’s an absolute necessity.
About the authors
Rezaul Karim, Advisory Board Member at Compliance Week, is a financial crime compliance expert with over a decade of experience. He has held multiple compliance assistant vice president roles roles at HSBC, and is a published author, speaker, and thought leader.
Rashidul Amin is a compliance professional at a leading international bank in Bangladesh. He is a certified AML specialist, and certified risk and compliance management professional. He has a proven track record in transaction monitoring, banking operations, AML quality assurance and various other areas of financial crime compliance.