TD Bank Group takes US$2.6B provision in Q3 on anti-money laundering investigation

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This article was published 21/08/2024 (768 days ago), so information in it may no longer be current.

TORONTO – TD Bank Group says it has taken a US$2.6-billion provision in its third-quarter results related to ongoing U.S. investigations into its anti-money laundering program.

The bank, set to release its third-quarter results Thursday, said in a press release Wednesday evening that it has taken the charge in anticipation of a global resolution of the civil and criminal investigations by the end of the year.

TD said the resolution will include both monetary and non-monetary penalties.

The bank also announced the sale of 40.5 million shares of the Charles Schwab Corp., worth about US$2.6 billion based on a closing price of US$64.57. That reduces the bank’s ownership in the company from 12.3 per cent to 10.1 per cent.

Chief executive Bharat Masrani said the bank recognizes the seriousness of the deficiencies in its anti-money laundering program.

“TD continues to work constructively with our regulators and law enforcement towards resolution of our U.S. AML matters and looks forward to bringing additional clarity to our shareholders, clients and other stakeholders,” Masrani said in the press release.

Masrani said the bank’s remediation program is “well underway.”

TD is strengthening its U.S. anti-money laundering program with the addition of “globally recognized leaders and talent from across the industry, including experts from regulatory agencies, law enforcement and government,” he said, and is also investing in data and technology, training and process design.

The bank’s second-quarter earnings took a hit from a $615-million initial charge, or US$450 million. Its profits were down 22 per cent year over year that quarter.

At the time, the bank said its program was “insufficient to effectively monitor, detect, report and respond to suspicious activity.”

Last August, the bank revealed that it expected U.S. regulators to impose penalties on it over its anti-money laundering compliance program.

In early May, not long after the initial charge was announced, the Financial Transactions and Reports Analysis Centre of Canada, or Fintrac, imposed a $9.2-million penalty against TD for non-compliance with money laundering and terrorist financing measures.

The penalty was for five violations during a review between March 1, 2022, and March 31, 2023, the agency said.

These failures included not submitting suspicious transaction reports when there were reasonable grounds to require it to do so, not assessing and documenting money laundering or terrorist activity financing risks, and not taking prescribed special measures for high risk.

At the time, the bank said it was working to improve, and was attending to specific administrative findings from Fintrac.

Masrani spoke to shareholders in April at TD’s annual general meeting, telling them, “Regretfully, our program was not where it needed to be.”

In June, a proposed class-action lawsuit was launched against TD on behalf of shareholders who bought shares between Aug. 26, 2021, and June 3, 2024. The suit alleged the bank misrepresented systemic deficiencies in its anti-money-laundering controls which, after they were disclosed, caused a significant drop in its stock price.

TD said the allegations in the proposed class action are without merit and would be contested.

— With files from Ian Bickis

This report by The Canadian Press was first published Aug. 21, 2024.

Companies in this story: (TSX:TD)