In light of TD Bank facing significant penalties due to U.S. officials uncovering a major money laundering and drug trafficking operation in a number of U.S. states, you are now seeing a CEO of a major leading financial institution in Canada acknowledge that his bank has to do better. They are taking steps to address this urgent matter. What also needs to happen is for financial institutions in Canada, whether they are our big banks or other ones including provincially regulated credit unions, to take more responsibilty for their failure to detect and report suspicious money laundering activity within their operations.

What are they doing to prevent money laundering activities from being carried out to remove money from the accounts of their clients and members? In the UK through its Consumer Duty, innocent victims of Authorized Push Payments (APPs) through the deception and sophisticated tactics of third party fraudsters are now being required to be reimbursed for their losses by both the sending and receiving financial institutions within their country. What is Canada doing to hold its financial institutions accountable as we are seeing in the U.S. and the UK?

TD CEO Masrani tells staff he is disappointed by anti-money-laundering failings but they are being fixed

STEFANIE MAROTTA BANKING REPORTER THE GLOBE AND MAIL

PUBLISHED MAY 7, 2024 UPDATED MAY 8, 2024

Toronto-Dominion Bank’s TD-T +0.66%increase chief executive officer Bharat Masrani and top leaders have done a tour of employee meetings with executives to ease concerns stemming from a lengthy probe by U.S. regulators and law enforcement agencies into weaknesses in the lender’s anti-money-laundering processes.

Reports that surfaced last week provided the first glimpse into TD’s anti-money-laundering gaps. The investigations by U.S. officials are tied to a US$653-million money-laundering and drug-trafficking operation, providing a long-awaited look into the issues that derailed TD’s major acquisition of Tennessee-based First Horizon Corp. last year.

In response to the news, Mr. Masrani and his executive team – including U.S. head Leo Salom, TD Securities head Riaz Ahmed, Canadian business banking head Barbara Hooper, wealth and insurance head Tim Wiggan and Canadian personal banking head Raymond Chun – embarked on a round of calls with the most senior leaders in their businesses, according to a source.

The Globe and Mail is not naming the source because they were not authorized to speak publicly about the matter.

“We will continue our discussions with all the U.S. authorities and the Department of Justice in the United States, and I’m hoping that we can resolve this as soon as possible,” Mr. Masrani said during a town hall meeting with employees Monday, according to a transcript viewed by The Globe. “We’re looking at a global resolution. But in the meantime, it is critical that we hold our heads high.”

The bank is facing monetary and non-monetary penalties as a result of aU.S. investigation, and analysts and investors have pointed to concerns around the bank’s growth prospects and its succession plans.

TD’s senior executive team spoke to employees about the work the bank is doing to remediate its anti-money-laundering practices, and reassure their teams that they are working to resolve the matter, the source said.

“Over the past week, Bharat and the leadership team have been speaking with colleagues across the bank about this matter, sharing what actions we’re putting in place to address these issues and the path forward,” TD spokesperson Elizabeth Goldenshtein said in an e-mail statement. “They continue to be focused on serving our customers and clients around the globe and running the bank.”

In an internal memo to employees, Mr. Masrani said TD is overhauling its anti-money-laundering program by hiring new leaders and hundreds of employees, redesigning controls, building new processes, deploying new technology and implementing improved training. The bank has also invested more than half a billion dollars in remediating its anti-money-laundering program.

“We did not meet our expectations or our regulatory obligations to monitor, detect, report and respond to suspicious activity. As a result, criminals broke through our defences and used the bank to launder money,” Mr. Masrani said in the memo viewed by The Globe.

“This is absolutely unacceptable. While our systems stopped a lot of activity, I am deeply disappointed there were serious instances where we failed to stop these criminals. It goes against our values and everything we believe.”

Early last week, TD said it is setting aside US$450-million to cover penalties stemming from an investigation, but added the provision does not reflect the final amount of the potential monetary penalties or any non-monetary penalties.

Later in the week, news emerged that the lead defendant in the money-laundering and drug-trafficking operation, Da Ying Sze, who goes by David, pleaded guilty in 2022 to laundering hundreds of millions of dollars in cash, “consisting of narcotics and other illicit proceeds, utilizing a variety of financial institutions and methods,” the U.S. Department of Justice wrote in a summary of its investigation.

Law enforcement agencies said in a criminal complaint that they tracked Mr. Sze to multiple branches of a single financial institution, referred to as “FI-1.” That institution is TD, a source told The Globe earlier. The Globe is not naming the source because they were not authorized to speak publicly about the matter.

“This story, in particular, raised a lot of concerns because it linked the TD name to the illicit drug trade,” Mr. Salom said in an internal memo to employees.

“That is not a headline any institution would want, and for TD it is truly sobering. The DOJ and regulatory investigations are ongoing, and I am therefore limited by law in what I can discuss. However, I can assure you we are co-operating and working hard to resolve these matters.”