TD Bank Now Takes Painful $2.6 Billion Hit in Penalties

August 21, 2024

TD Bank now takes a painful $2.6 billion hit in penalties relating to its deficiencies in its Anti-Money Laundering (AML) program.

The bank says it has set aside a whopping $2.6 billion to cover its penalty and would sell a part of its stake in Charles Schwab to offset its losses.

The lender has allocated over $3 billion to cover potential penalties related to ongoing global anti-money laundering (AML) investigations.

This includes a $450 million provision made in April.

The lender anticipates a resolution to these probes by the end of the year, which could involve both financial and non-financial penalties, per Bloomberg.

TD Bank is facing investigations in the U.S. regarding allegations that Chinese drug traffickers used the bank to launder over $650 million between 2016 and 2021.

These investigations also involve allegations of bribery by a bank employee who facilitated the laundering of drug money.

Separately, the lender announced it will sell 40.5 million shares of Charles Schwab, reducing its ownership in the U.S. brokerage to 10.1% from 12.3%.

This sale is valued at $2.6 billion based on Wednesday’s closing price.

“We recognize the seriousness of our U.S. AML program deficiencies and the work required to meet our obligations and responsibilities is of paramount importance,” TD CEO Bharat Masrani said in a statement.

“Our remediation program is well underway.

TD has strengthened its U.S. AML program.”

Masrani and other executives will take questions from analysts on Thursday after the lender reports third-quarter earnings.

“While the market now has certainty surrounding the amount of the charge, this is offset by the fact that it is larger than expectations and the impact this has on capital,” Jefferies analyst John Aiken said.

The U.S. regulatory probes were announced shortly after TD terminated its planned $13.4 billion purchase of U.S. regional bank First Horizon.

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Also Read: Massive Banks Are Now Accused of Cheating Customers Billions

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Massive banks are now accused of cheating customers billions of dollars in interest payments according to financial reports.

According to a new report by Financial Times, several major Wall Street banks, including Wells Fargo, Morgan Stanley, and Bank of America, are accused of defrauding customers out of billions of dollars in interest payments.

The U.S. Securities and Exchange Commission (SEC) is currently investigating these banks to determine whether they intentionally steered clients toward “cash sweep” accounts that provided little to no interest earnings, despite the availability of higher-yielding options.

This alleged practice by the banks would amount to bilking customers out of significant sums of interest income that they should have rightfully earned on their deposits and cash holdings.

The SEC’s probe is aimed at uncovering whether this was a deliberate strategy by the banks to boost their own profits at the expense of their clients.

The report in the Financial Times highlights the concerning allegations of widespread misconduct by some of the largest financial institutions on Wall Street.

If substantiated, this could represent a major scandal involving the potential exploitation of customers through the mismanagement of their cash accounts and interest earnings.

The SEC’s investigation will be crucial in determining the full scope and nature of these alleged practices, as well as any potential enforcement actions or penalties that may be levied against the implicated banks.

The revelations have emerged from new Quarterly filings with the SEC.

In those filings, Wells Fargo says it’s in “resolution talks” with the agency over the issue, Morgan Stanley says the agency began asking questions about it in April and Bank of America confirms it’s currently being scrutinized.

All three banks have declined to comment on the matter.

Other financial firms involved in lawsuits related to cash sweep accounts include LPL Financial and Ameriprise.

LPL Financial says it plans to “vigorously” defend itself against the allegations, while Ameriprise has not released a public statement on the matter.

Also Read: The US Treasury Direct is Now Freezing Customer Accounts

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