TD Bank faces criminal charges and a $3 billion penalty for global money laundering operations tied to drug cartels and gambling. (Image: B Christopher / Alamy)

TD Bank faces a potential $3 billion penalty and restrictions on its U.S. operations due to allegations of failing to prevent money laundering linked to drug cartels and potentially the gambling industry such as online casinos, among other criminal activities. 

The Office of the Comptroller of the Currency is expected to impose these penalties after the bank's inadequate anti-money laundering practices were highlighted in a recent investigation. The bank acknowledged a significant third-quarter loss, setting aside billions in anticipation of fines, and CEO Bharat Masrani will step down in April 2025. Following this news, TD Bank's shares dropped approximately 5%.

Criminals Laundered Millions to Use for Production of Fentanyl 

U.S. Attorney General Merrick B. Garland announced that TD Bank pleaded guilty to multiple felony charges, including conspiring to violate the Bank Secrecy Act. The bank admitted to inadequately monitoring $18.3 trillion in customer activity from 2014 to 2023, which allowed criminals to move over $670 million through its accounts.  

Money launderer Da Ying Sze deposited $372,000 in cash at a TD Bank branch in midtown New York in 2020. (Image: (U.S. Justice Department)

As part of the settlement, TD Bank will implement substantial reforms to its compliance program and face a period of outside monitoring. The situation underscores serious vulnerabilities in the bank’s operations and raises questions about its compliance efforts in relation to broader illicit activity potentially involving drug money. The allegations were that Mexican and Chinese cartels were laundering money used in the production of fentanyl, which was then sold in the USA.   

Concerns Criminal Web Could Extend to Gambling Industry

Concerns were also raised by Marc Cohodes, a U.S. investor known for exposing financial misconduct. Cohodes told The Bureau: "The amount of financial crime going on in Canada right now is far greater than the mind can comprehend. 

“It involves housing, mortgages, and illicit funds flowing in from European, Chinese, and South American networks into Canada's financial systems. The way Canada is welcoming third-world criminals and their funds risks turning it into a third-world enterprise." added Cohodes.

Cohodes has been publicly commenting on these issues since 2015, saying that urgent work was needed around Canada’s money laundering avenues like casinos and real estate.

Bank Became Criminal  

U.S. Attorney General, Merrick B. Garland, said the bank ‘created an environment that allowed financial crime to flourish’. Garland summed up the case succinctly by saying, “By making its services convenient for criminals, it became one.” He said that TD Bank had agreed to fundamentally restructure. It will now undergo an imposition of a 3-year monitorship and 5-year term of probation. 

U.S. Attorney General Merrick B. Garland criticized TD Bank for enabling financial crime. (Image: UPI / Alamy)

The Justice Department did not rule out multiple prosecutions of bank staff and those associated with the money laundering via association with the bank or the main target of the investigation, a man known as Da Ying Sze, known to TD Bank employees as "David."  

What Were the Failings of TD Bank?

TD Bank, N.A. and TD Bank USA, N.A. encountered significant deficiencies in their Anti-Money Laundering (AML) and Bank Secrecy Act (BSA) programs, resulting in regulatory violations and ineffective reporting of suspicious activities. 

A lengthy report by the Justice Department has highlighted critical areas of concern regarding the management and oversight of their AML compliance initiatives, linked to drug cartels and the gambling industry. 

The bank pleaded guilty to multiple felony charges, including conspiring to violate the Bank Secrecy Act. 

From 2014 to 2023, it reportedly monitored $18.3 trillion in customer activity, allowing over $670 million of criminal funds to flow through its accounts. As part of a settlement, TD Bank will implement major compliance reforms and will be monitored externally for three years. 

A comprehensive litany of failures and recommendations has been set out in a 99-page document published by The Financial Crimes Enforcement Network.  

A Woefully Inadequate Anti-Money Laundering Programme

TD Bank wilfully failed to establish an effective AML program, underinvesting in resources, staffing, and technology compared to its peer institutions. Senior management opted for cost-cutting solutions instead of necessary investments to address known compliance vulnerabilities. 

The bank struggled with chronic understaffing in its AML divisions, contributing to substantial backlogs in investigations of suspicious activities and customer account closures. Despite recognising these challenges, TD Bank delayed allocating additional resources until late in the scrutiny period. 

The bank's transaction monitoring systems exhibited critical gaps, notably failing to adequately cover high-risk transaction types, including gambling-related transactions, domestic ACH transactions, and wire transfers. Significant cash activity originating from jurisdictions associated with casinos and gambling remained unmonitored, leading to missed opportunities for timely intervention.  

Failures in Reporting Hampered Ability to Detect Illicit Activity 

TD Bank was found to have late filed over 6,000 suspicious activity reports (SARs), impacting more than $500 million in suspicious activity. The bank misreported information in over 4,000 Currency Transaction Reports (CTRs), misleading law enforcement and hampering their ability to detect illicit behaviours, including those related to gambling enterprises. 

The governance structure impeded the BSA Officer from executing responsibilities effectively, resulting in silos that limited accountability and oversight. There was inadequate examination of high-risk accounts and transactions, including those linked to casinos.

Insufficient Training in Addressing Risks in Gambling Sector 

Training provided to staff regarding AML compliance and monitoring was insufficient, failing to address specific risks associated with the bank’s business lines—including those linked to the gambling sector. 

The bank's approach to due diligence for High-Risk Customers (HRCs) was inadequate, particularly in assessing clients involved in gambling. The bank lacked appropriate procedures necessary for effective monitoring, resulting in many millions of suspicious transactions linked to these high-risk industries going undetected.  

TD Bank's systemic compliance failures raised serious concerns about the efficacy of its AML controls and the bank's role as a potential facilitator for money laundering activities, particularly within gambling and other high-risk sectors.

TD Bank's CEO, Bharat Masrani, will step down in 2025 amidst this scandal. (Image: Associated Press / Alamy)

The acknowledgement of these issues by TD Bank was only forthcoming in response to regulatory pressures and investigations. The bank failed to establish comprehensive controls sufficient to mitigate risks associated with Tier I and Tier II HRCs. 

For instance, the highest-risk customers categorised as Tier I—entities like casinos, internet gambling organisations, and others susceptible to significant money laundering risks—were inadequately subjected to comprehensive transactional reviews to ascertain whether their use of the bank’s products and services aligned with TD Bank’s risk profile. 

Thousands of Unnamed Crime Victims Due to Systemic Failures

Sadly, many hundreds, if not thousands, of unnamed individuals will be directly or indirectly the victims of the crimes that generated such vast sums of cash involving countries as far afield as Columbia and the UK, China, and the USA. 

A network of criminal activities thrived as a result of the gross incompetence and ineptitude, including massage parlours, prostitution, sex trafficking, illegal gambling, and computer scams. 

The list of business outlets may or may not be published in time as authorities attempt to target the associates of the main man identified thus far.

Inevitably, many who participated will go undetected to continue with their criminal activities, which were allowed to thrive through a massive banking network, an institution that should have been the pinnacle of trust.