Feds Hammer TD on AML Failures

The corporate compliance community has a new case-study in program failures courtesy of TD Bank, which will pay more than $3 billion to settle charges that its anti-money laundering compliance program had been a mess for years; and must also live under restrictions on future growth until it completes an overhaul of its AML compliance program.

Banking regulators and the Justice Department announced the settlement Thursday afternoon, although TD disclosed the investigation ages ago and has been salting away cash to cover the monetary penalties. 

This is a huge settlement, so Radical Compliance will explore it next week in greater detail. Today I want to focus on one specific element: that restriction on TD’s growth until it remedies its compliance program — because if any single punishment can fix a board’s attention on the importance of good conduct, a growth restriction is it.

The restriction was imposed by the Office of the Comptroller of the Currency. As described in the OCC settlement order, TD’s total assets cannot exceed $434 billion (TD’s total assets as of Sept. 30) without OCC approval, and that approval will not come until TD completes an extensive transformation of its AML compliance program. 

That is painful enough, but there’s more. If TD doesn’t make progress on those compliance program reforms in a timely manner, OCC can reduce that asset cap by another 7 percent, and keep going until TD gets its compliance act together. In other words, the longer TD drags its feet on implementing compliance reforms, the tighter the leash around its neck is going to get.

That’s an astonishing move. For comparison purposes, the only other recent example of regulators capping a bank’s total assets happened back in 2016, when they capped Wells Fargo’s total assets at $2 trillion for its fake accounts scandal — and even that misconduct incident, legendary in corporate compliance lore, did not include a mechanism to tighten the cap if Wells dragged its feet. TD Bank’s sanction does.

The question now for TD Bank is how it will implement all those compliance reforms. In brief, they include:

  • Establishing a dedicated compliance committee at the board level;
  • Drafting a plan within 120 days to overhaul its AML compliance program;
  • Hiring an independent compliance consultant within 60 days to conduct his or her own review of TD’s compliance program;
  • Hiring a senior-level AML compliance officer (already done, according to a TD Bank statement)
  • Staffing up a more robust AML compliance function (also already done, TD says; the bank has hired more than 700 compliance employees)
  • Implementing new policies, procedures, training, and all the other usual requirements we’ve seen from similar banking settlements.

We should also note that OCC has been quite busy these last few months. It fined Citibank an extra $136 million for failing to improve its compliance program as promised from a previous settlement in 2020; and recently dinged Wells Fargo again for its slow pace of compliance program improvements with new restrictions on products that Wells can release (in addition to the $2 trillion asset cap from 2016, which remains in place to this day).

So if there’s any common theme here, it’s that banking regulators are ready to slow a bank’s growth by force until said bank reorganizes its operations to support a robust compliance program that can keep pace with that growth.

That’s all we have time to explore today. Look for much more next week.

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