Analysts say fines could rise as TD Bank faces new allegations

The Toronto-Dominion Bank (TD Bank) could face fines of up to $4 billion amid money laundering investigations in the United States.

This estimate from analysts at Jefferies Financial Group is double previous estimates, underscoring the severity of the potential impact on Canada's second-largest lender, Bloomberg reported Wednesday (June 5).

The allegations relate to instances in which TD Bank branch employees allegedly facilitated money laundering and circumvented anti-money laundering (AML) defenses, according to the report.

The U.S. Department of Justice, banking regulators and the Treasury Department are currently investigating TD Bank over allegations of money laundering and other financial crimes at several of its U.S. branches, the report said.

Investigations revealed cases involving a former employee of a TD Bank branch in Florida who allegedly took bribes to help customers transfer millions of dollars to Colombia, as well as a former employee of New York who admitted to defrauding a customer by circumventing the bank's compliance measures. according to the report.

In a statement provided to PYMNTS on Tuesday (June 4), a bank spokesperson said, “TD, like all financial institutions, works with law enforcement to identify, arrest and support the prosecution of criminals.” When we became aware of these issues, we took action against these employees, coordinated our efforts with the DOJ, and supported their work to bring these criminals to justice. More broadly, where our program has proven ineffective, we have held these leaders accountable and are taking action to drive change and fulfill our obligations.

These revelations come after TD Bank initially set aside $450 million for possible regulatory fines, according to Wednesday's Bloomberg report.

However, analysts believe that this amount may not be enough, given additional cases reported since then, the report said. Potential fines against TD Bank have been estimated by various analysts, with previous estimates ranging from $600 million to $2 billion. One analyst suggested the fine could exceed $3 billion and TD Bank could face an asset cap on its U.S. operations for five years.

Aside from potential fines, TD Bank is also grappling with a proposed shareholder class-action lawsuit filed in Canada, according to the Bloomberg report.

The lawsuit alleges that the bank misrepresented systemic deficiencies in its AML controls and the impact of those failures on its U.S. operations, according to the report.

TD Bank spokeswoman Lisa Hodgins told Bloomberg: “TD's public information and statements are and have been accurate and consistent with our obligations under the securities laws and our responsibilities to our shareholders. . We will contest the assertions in these proposed class action lawsuits, which are without merit.