Should Canadian bank customers, investors worry about money laundering probes?
Ongoing anti-money laundering probes at TD Bank and penalties levied at other Canadian financial institutions aren’t likely to have a material impact on banking customers, experts say, though the regulatory crackdown could have implications for investors and the banking sector long-term.
TD faces a regulatory probe in the United States on allegations that Chinese drug traffickers used the bank to launder at least US$650 million from 2016 through 2021 and that an employee took a bribe to facilitate the laundering of drug money, according to Reuters.
The bank has said it was setting aside US$450 million to cover potential fines for one of three regulatory probes and expects more monetary penalties.
The lender has also been fined $9.2 million by the Financial Transactions and Reports Analysis Centre of Canada – or Fintrac, the Canadian financial watchdog – for administrative violations.
TD CEO Bharat Masrani conceded in a conference call earlier this month that there had been “unacceptable” incidents where the bank did not effectively monitor, detect, report and respond to suspicious activity. TD Bank has said it is making investments of about $500 million to overhaul its compliance program and has also terminated employees.
Two credit rating agencies, Fitch and S&P Global, downgraded their outlook for TD Bank this week amid the probes. Both agencies have maintained their AA- rating for the bank’s debt.
And while recent headlines have focused on TD Bank’s woes, it’s not the only Canadian bank that has been slapped with fines over failing to report suspicious transactions.
In December 2023, Fintrac announced in the same week that it had penalized RBC for $7.5 million and CIBC for $1.3 million, both on grounds of
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