Commons committee to consider launching investigation into anti-money laundering violations by TD Bank

A House of Commons committee plans to investigate lapses in the Toronto-Dominion Bank’s anti-money laundering practices as U.S. regulators and law enforcement continue a lengthy investigation into the second-largest lender of Canada.

The House finance committee will hold a meeting Friday afternoon to discuss allegations that TD failed to report money laundering linked to trafficking of the illegal drug fentanyl, in what would mark Ottawa’s first public conversation On the question. Committee members will then consider whether the issue warrants further examination of gaps in the bank’s anti-money laundering practices.

In early May, reports emerged that the investigation by U.S. officials — which derailed the major acquisition of Tennessee-based First Horizon Corp. last year — was linked to a money laundering operation and drug trafficking of $653 million.

The revelation provides the first insight into TD’s anti-money laundering shortcomings since the bank revealed in August that it expected monetary and non-monetary fines stemming from the U.S. investigation.

The Finance Committee will also discuss whether to examine other money laundering offenses in the financial sector in Canada. Although the group has scheduled a conversation for Friday afternoon, an outstanding issue from a previous meeting could delay the TD matter.

TD did not immediately respond to a request for comment.

The bank faces monetary and non-monetary sanctions stemming from the U.S. investigations. Analysts estimate the amount could reach $2 billion and have highlighted concerns about other non-financial sanctions that could limit the bank’s growth prospects.

In January, the Globe revealed that last year, TD hired Herbert Mazariegos – a former Bank of Montreal employee in Chicago – to oversee the bank’s anti-money laundering unit.

Since then, the bank has brought in other experts with regulatory experience, including former Federal Bureau of Investigation (FBI) agent Dandridge Myles, former U.S. Department of the Treasury Director Andrew Jensen, l former Director of the US Department of Homeland Security Marcy Forman and the former head of Citigroup. compliance manager Jackie Sanjuas, according to a source.

The Globe is not identifying the source because they were not authorized to speak publicly.

In recent weeks, TD CEO Bharat Masrani and senior executives have participated in internal meetings with executives to discuss steps the bank is taking to resolve the problems.

“We have failed to meet our expectations and regulatory obligations in monitoring, detecting, reporting and responding to suspicious activity. As a result, the criminals broke our defenses and used the bank to launder money,” Mr. Masrani said in an internal memo seen by the Globe.

“This is absolutely unacceptable. Although our systems have stopped many activities, I am deeply disappointed that there have been serious cases where we have failed to stop these criminals. This goes against our values ​​and everything we believe in.

The U.S. investigation and the cost of resolving the issues weigh heavily on the bank.

In late April, TD announced that it was providing US$450 million to cover sanctions arising from an investigation, but added that this provision did not reflect the final amount of potential monetary or non-monetary sanctions.

Last year, the bank said it expected to post an adjusted net loss of $200 million to $250 million per quarter this year in its internal corporate segment, thanks to investments in its risk and controls infrastructure.