TD Bank Puts Aside $2.6 Billion for Money Laundering Investigation

Lapses in its anti-money laundering (AML) program continue to cost Toronto-Dominion Bank (TD Bank).

The lender announced third-quarter earnings Thursday (Aug. 22) that include a $2.6 billion provision related to a possible investigation into the AML program. This follows a $450 million provision announced during the previous quarter.

U.S. regulators have been examining the Canadian bank’s AML efforts, leading TD to embark on a “remediation” of the program.

“As part of this work, the bank has been making investments in its risk and control infrastructure, including onboarding leadership with deep subject matter expertise supported by increased staffing resources, implementing new cross-functional procedures for preventing, detecting and reporting suspicious activity,” the bank said in its earnings release.

TD Bank adds that it is also investing in data and technology, training and process design to allow for improved transaction monitoring and data analytics capabilities.

Earlier this year the bank said it had fired more than a dozen employees, and brought criminal charges and disciplinary action against some of them.

In addition to the investigations in the U.S., a Canadian banking regulator has fined TD for its failure to file suspicious-activity reports and document risks connected to money laundering and terrorist activity.

The bank’s AML troubles were also reportedly behind the collapse of TD’s $13.4 billion plan to acquire First Horizon Bank.

As PYMNTS wrote last month, this is happening amid a period of growing scrutiny on banks’ AML efforts, with companies including Green Dot and Morgan Stanley being targeted by regulators in recent months.

“And where these firms, banks and FinTechs among them, are deemed to come up short, there’s a (literal) price to pay,” that report said.

“In the meantime, the very rules governing AML and fraud-fighting efforts may change, as a commentary period is ongoing as regulators seek input on the use of advanced technologies to sharpen fraud defenses at financial institutions (FIs).”

Banks point to increased fraud risk as a major obstacle, according to research by PYMNTS Intelligence, with manual AML checks making things even more challenging. The research shows that 75% of FIs rely on outdated, labor-intensive processes.

“This reliance contributes to delays and perceived risks,” PYMNTS wrote. “There is growing recognition, however, that integrating AI could alleviate these issues, making real-time payments more secure and efficient.”