Lessons from TD Bank

In 2024, TD Bank was fined over $3 billion due to significant failures in its anti-money laundering (AML) compliance. These penalties were imposed by multiple U.S. regulators, including the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Financial Crimes Enforcement Network (FinCEN). TD Bank's violations of the Bank Secrecy Act (BSA) and its involvement in money laundering activities were the core issues.

For over a decade, TD Bank failed to adequately monitor high-risk accounts, process suspicious activity reports (SARs), and invest in proper AML oversight. One major lapse involved the bank allowing trillions of dollars in transactions to go unmonitored and thousands of suspicious activities to remain unresolved. This negligence enabled criminal networks to funnel hundreds of millions of illicit funds through the bank undetected.

As part of the settlement, TD Bank faces growth restrictions, including being unable to open new branches in the U.S. without regulatory approval. Moreover, the bank is undertaking a multi-year effort to overhaul its AML processes, investing in better technology, training, and staffing to prevent future violations.

For other financial institutions, this case serves as a stark warning. Regulatory bodies are tightening their scrutiny on AML programs, and non-compliance can lead to severe penalties. Banks are reminded that they serve as the first line of defense against financial crime and must ensure they have robust systems to detect and report suspicious activities, or risk facing similar consequences.

What role did/does training play?

Ineffective training was a key factor in TD Bank's 2024 compliance failures. The bank's inability to properly train its employees on anti-money laundering (AML) protocols led to significant gaps in its ability to detect and report suspicious activities. Specifically, TD Bank understaffed its AML department and hired employees without sufficient experience in AML, which resulted in a lack of understanding of the Bank Secrecy Act (BSA) requirements.

The lack of effective training also led to poor internal controls and decision-making. For example, AML staff failed to investigate or close accounts flagged by law enforcement, and employees knowingly misfiled reports, further exacerbating the compliance breaches.

For other financial institutions, this serves as a lesson on the importance of comprehensive, ongoing AML training to ensure that employees are well-versed in identifying, escalating, and mitigating financial crime risks.