On September 30, TD Bank agreed to pay U.S. authorities over $3 billion to settle charges that it violated the Bank Secrecy Act by failing to maintain a strong anti-money laundering (AML) program.

Key Takeaways

• The settlement included the largest penalty in the history of FinCEN
• Under the new AML Whistleblower Program, whistleblowers may anonymously report Bank Secrecy Act violations and may be eligible for monetary awards

The unprecedented penalties levied by U.S. authorities against TD Bank for its egregious violations of the Bank Secrecy Act (BSA) serve as a warning to financial institutions. The record settlement underscores the dire consequences of failing to maintain a strong anti-money laundering (AML) program.

On September 30, the U.S. Department of Justice announced $1.8 billion in penalties against the bank, and the Financial Crimes Enforcement Network (FinCEN) announced a related $1.3 billion penalty, the largest in the history of the agency.

“For over a decade, TD Bank allowed its AML program to languish, making TD Bank a target for illicit actors—including its own employees,” said FinCEN Director Andrea Gacki. “The magnitude of FinCEN’s action is consistent with the harm that TD Bank’s failures caused. This historic action should serve as a powerful reminder that we will not tolerate financial institutions who flagrantly violate their obligation to safeguard our financial system from criminal activity.”

As part of its settlements with FinCEN and the DOJ, TD Bank admitted to willfully failing to implement and maintain an AML program consistent with the BSA. “TD Bank knew that its AML program was neither appropriately designed nor adequately resourced to mitigate the actual illicit finance risks that it faced on multiple fronts,” FinCEN claims.

The failures outlined by the authorities include:

• “TD Bank’s processing of peer-to-peer transactions (e.g., Venmo and Zelle), including transactions indicative of human trafficking, was insufficient, and as a result, TD Bank failed to identify and timely report these transactions to FinCEN.”
• “TD Bank knew that it was the subject of significant funnel account activity involving high-risk countries yet failed to take timely action to address this substantial risk.”
• “In 2021, a TD Bank employee facilitated the laundering of narcotics proceeds in exchange for bribes. This employee opened numerous accounts, including for shell companies, that then engaged in millions of dollars worth of funnel account activity in a high-risk jurisdiction where TD Bank maintained no operations. TD Bank knew that this type of activity was not subject to appropriate controls and failed to mitigate this glaring risk.”
• “From 2017 to 2021, TD Bank facilitated over $400 million in transactions for Da Ying Sze (Sze), who pled guilty to money laundering in 2022 for his role in conspiring to hide proceeds of narcotics trafficking. Sze conducted most of these transactions in large sums of cash (often in bags that Sze brought into TD Bank branches), yet the Bank failed to timely limit or restrict Sze’s activity.”
• “Between January 2018 and February 2021, one money laundering network processed more than $470 million through the bank through large cash deposits into nominee accounts. The operators of this scheme provided employees gift cards worth more than $57,000 to ensure employees would continue to process their transactions. And even though the operators of this scheme were clearly depositing cash well over $10,000 in suspicious transactions, TD Bank employees did not identify the conductor of the transaction in required reports.”

“For years, TD Bank starved its compliance program of the resources needed to obey the law. Today’s historic guilty plea, including the largest penalty ever imposed under the Bank Secrecy Act, offers an unmistakable lesson: crime doesn’t pay — and neither does flouting compliance,” said Deputy Attorney General Lisa Monaco. “Every bank compliance official in America should be reviewing today’s charges as a case study of what not to do. And every bank CEO and board member should be doing the same. Because if the business case for compliance wasn’t clear before — it should be now.”

In addition to sending a clear message about the cost of non-compliance with the BSA, the settlements underscore the potential of FinCEN’s recently established AML Whistleblower Program.

Under the program, which was reformed into a best-practice whistleblower award program with the passage of the AML Whistleblower Improvement Act in December 2022, individuals may anonymously report potential violations of the BSA and qualify for monetary awards if their disclosure leads to a successful enforcement action.

While FinCEN and the DOJ did not disclose whether a whistleblower was involved in the TD Bank case, the settlements showcase the types of misconduct that whistleblowers can report under the program, as well as the potential size and scope of money laundering within financial institutions.

In an article for Bloomberg Law published in January, leading whistleblower attorney Stephen M. Kohn predicted that the AML Whistleblower Program would have a major impact in 2024, writing: “The Anti-Money Laundering Whistleblower Improvement Act has potential to be the most effective transnational anti-corruption law on the books. In 2024, the law, and the AML Whistleblower Program it established, should start to deliver on this potential as whistleblower award programs continue to play a more central role in US global anti-corruption efforts.”

To date, his prediction appears to be coming true. In May, FinCEN Director Gacki praised the program, stating that it “holds tremendous potential as an enforcement force-multiplier” and that “We have received over 270 unique tips since the program’s inception, and many of the tips received have been highly relevant to many of Treasury’s top priorities.” The AML Whistleblower Program has the potential to significantly enhance the effectiveness of anti-money laundering efforts, particularly as it continues to receive and act on tips from whistleblowers.

Geoff Schweller contributed to this article