Report: TD to Face US Growth Limits, $3B Penalty for Money-Laundering Failures

Toronto-Dominion Bank will pay about $3 billion in penalties and face restrictions on its U.S. growth in a settlement with regulators over its failure to catch money laundering, the Wall Street Journal reported.

Regulators are likely to announce a settlement with the Canadian bank on Thursday, though that timing may change, a person familiar with the matter told Bloomberg, asking not to be named discussing confidential information. The bank said it plans to hold a conference call and will confirm the time later.

The Office of the Comptroller of the Currency is expected to impose a cap on Toronto-Dominion’s U.S. retail banking assets as part of the agreement, the Journal said, citing people familiar with the matter it didn’t identify.

The size of the financial penalty doesn’t come as a surprise because Toronto-Dominion has already set aside $3 billion in provisions for the settlement. But an asset cap seems certain to prevent the bank from carrying on the growth-by-acquisition strategy it has followed in US retail banking for much of the past two decades. Wells Fargo & Co. has been under similar regulatory limits on the size of its balance sheet for several years.

Canada’s second-largest bank has faced an array of legal challenges south of the border, including probes by the OCC, the Department of Justice and the Federal Reserve into alleged failures to catch money laundering and other financial crimes at several branches in New York, New Jersey and Florida.

The investigations have had a wide-ranging impact on the bank, including marring the end of Chief Executive Officer Bharat Masrani’s decade-long tenure. He took responsibility for the anti-money-laundering challenges when Toronto-Dominion announced his retirement last month. Raymond Chun, who currently leads its Canadian division, will take the top job on April 10.

Toronto-Dominion was also forced to scrap its $13.4 billion deal to acquire US regional bank First Horizon Corp. last year after saying it couldn’t get timely regulatory approvals.

Spokespeople for the bank and the OCC weren’t immediately available for comment Wednesday, while a representative for the Federal Reserve declined to comment.

The Canadian bank has more than 10 million U.S. customers and almost 1,200 branches concentrated along the East Coast, and its American retail operations account for about a quarter of its revenue. But there have been persistent questions about whether it will be able to continue to expand that business.

Toronto-Dominion recently reached a deal with US prosecutors and regulators to pay more than $20 million to resolve a Treasuries spoofing case and, separately, agreed to pay almost $28 million in fines and restitution for sharing inaccurate US customer data with consumer reporting companies.

Top photo: Pedestrians pass in front of a TD Ameritrade Holding Corp. bank branch in New York, New York, US., on Saturday, April 20, 2019. TD Ameritrade Holding Corp. is scheduled to release earnings figures on April 23.