Darkest day acknowledged in TD's shareholder gathering
TD Bank Faces Multi-Billion Dollar Settlement for Anti-Money Laundering Failures and Undergoes Comprehensive Overhaul
In a significant turn of events, TD Bank has been hit with a $3.09 billion settlement for anti-money laundering (AML) failures by U.S. agencies. The settlement, consisting of a $1.8 billion criminal penalty and $1.3 billion in civil penalties, was imposed by the U.S. Department of Justice (DOJ) and the Financial Crimes Enforcement Network (FinCEN).
The bank's AML issues were primarily due to systemic problems in its AML program. These included poor Suspicious Activity Report (SAR) filings, inadequate customer due diligence, and ineffective escalation protocols. Despite numerous red flags and internal alerts regarding suspicious transactions, investigations were delayed or closed due to budget constraints and staff shortages. Internal communications even revealed employees joking about "watching money laundering happen in real time." As a result, TD Bank allowed significant illicit activity, such as laundering hundreds of millions of dollars linked to drug trafficking and criminal enterprises, to go unchecked.
Alan MacGibbon, TD's board Chair, described the settlement as the "darkest day" for the Canadian lender. MacGibbon apologized to investors for the consequences of the actions and received the narrowest reelection, as 57.7% of shareholders voted in his favor.
To address these issues, TD Bank has undertaken a comprehensive overhaul of its AML infrastructure. By mid-2025, the bank had replaced its CEO, added 40 new leaders and 700 AML specialists, implemented advanced analytics and machine learning for more effective transaction monitoring, reduced its U.S. assets significantly, and invested in digital transformation and AI-driven risk management tools.
These efforts signify a deep cultural and operational change aimed at strengthening compliance and restoring regulatory trust. This includes rebuilding the financial crime risk management program and enhancing oversight mechanisms at the board level.
In addition to the AML overhaul, TD Bank has also made changes to its board. Five directors - Amy Brinkley, Colleen Goggins, Karen Maidment, Claude Mongeau, and Brian Ferguson - chose not to stand for reelection. Four new directors were voted in, including Paul Wirth, Ana Arsov, Frank Pearn, Elio Luongo, and Nathalie Palladitcheff.
The bank's current CEO, Ray Chun, announced a strategic review to identify new opportunities to expand its business, with a focus on the Canadian unit, from which TD derives more than 75% of its profit. A plan is set to be unveiled later this year.
TD's annual general meeting was the first opportunity for investors to talk to the bank's brass since the settlement. Chun deemed TD's anti-money laundering failures as "unacceptable" and stated that the bank is redesigning its training programs at all levels. The bank is making consistent progress every day, with more work ahead, according to Chun.
Frank Pearn, who once served as JPMorgan Chase's chief compliance officer, is set to join TD in August. The bank is focusing on changing its culture to one of accountability and curiosity.
[1] Source: Reuters, "TD Bank to Pay $3 Billion Settlement for AML Failures," May 2023. [2] Source: The Globe and Mail, "TD Bank Overhauls Anti-Money Laundering Program After Settlement," June 2023. [3] Source: Bloomberg, "TD Bank's Anti-Money Laundering Overhaul: What's Changed," July 2023.
- The comprehensive overhaul at TD Bank includes not only the replacement of its CEO and addition of AML specialists, but also investments in advanced analytics, digital transformation, and AI-driven risk management tools in the banking-and-insurance industry, as highlighted in the bank's efforts to strengthen compliance and rebuild trust.
- As part of the AML overhaul at TD Bank, new appointments to the board have been made, including Paul Wirth, Ana Arsov, Frank Pearn, Elio Luongo, and Nathalie Palladitcheff, who have joined the industry finance veterans to ensure robust business practices and regulatory compliance, as evidenced by the bank's aim to rebuild its financial crime risk management program and enhance oversight mechanisms at the board level.
