TD Bank Group expects that regulatory fines for its U.S. anti-money-laundering failures could total more than $3 billion as its compliance woes continue to put pressure on its financial performance.
The Toronto-based company announced Tuesday afternoon that it has taken an additional $2.6 billion provision for potential penalties from U.S. regulators, on top of $460 million it had set aside earlier this year.
TD said that it expects a “global resolution” of investigations by the Department of Justice and the Treasury Department’s Financial Crimes Enforcement Network to be finalized by the end of 2024.
The Canadian bank, which is scheduled to report its third-quarter earnings on Wednesday morning, also announced that it sold 40.5 million shares in The Charles Schwab Corporation that it owned, which will cushion its capital from the effect of the provision.
TD’s risk management capabilities have been under scrutiny for more than a year, following the demise of its planned acquisition of First Horizon Corp. and its subsequent disclosure of a Department of Justice probe.
Bharat Masrani, TD President and CEO, said in a prepared statement Tuesday that the bank is working “constructively” with U.S. regulators and law enforcement, and “looks forward to bringing additional clarity to our shareholders, clients and other stakeholders.”
“We recognize the seriousness of our U.S. AML program deficiencies and the work required to meet our obligations and responsibilities is of paramount importance to me, our senior leaders, and our Boards,” Masrani said.
The Wall Street Journal has reported that the DOJ’s investigation arose from a criminal case involving the laundering of at least $653 million from illegal narcotic sales.
The bank said earlier this year it knew what went wrong with its AML processes, but it has been short on details about both the failures and its interactions with regulatory agencies. TD has reported spending more than $500 million on efforts to enhance its systems.
Masrani said in the statement Tuesday that the bank’s remediation program is “well underway,” and that TD has added new talent, invested in data and technology, training and process design.
Earlier this summer, the bank tapped Erin Morrow as its new chief compliance officer. Morrow had served since January as TD’s deputy chief compliance officer and, previously, in compliance roles at Citigroup.
