Toronto Dominion Bank (NYSE:) shares fell more than 5% on Thursday after reports of an upcoming $3 billion anti-money laundering settlement in the United States.
According to the Wall Street Journal, citing sources familiar with the matter, TD’s US unit is expected to plead guilty to charges that it failed to implement proper systems to combat money laundering .
The WSJ said the financial sanctions are expected to be imposed because the bank “has failed to properly monitor money laundering by drug cartels.”
The expected settlement will come with hefty fines and restrictions on growth for TD in the US
As part of the agreement with regulators, the Office of the Comptroller of the currency (OCC) is expected to impose an asset ceiling on TD’s retail operations, preventing any expansion above a certain level, according to the release.
The WSJ adds that the U.S. Department of Justice (DOJ) and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) will also appoint independent monitors to monitor the bank’s compliance with the settlement terms.
FinCEN’s monitor is expected to remain in place for four years, according to sources familiar with the matter.
TD Bank’s reported settlement follows a serious investigation that revealed deficiencies in its anti-money laundering protocols. The WSJ said federal authorities discovered that a Chinese criminal organization had laundered millions through TD branches in New York and New Jersey.
The investigation prompted U.S. regulators to take a closer look at the bank’s internal controls, ultimately derailing its planned $13.4 billion acquisition of First Horizon (NYSE:) in May 2023.
In light of regulatory challenges, TD has restructured its anti-money laundering and investigations divisions, hiring several key employees to improve its systems.
Despite these efforts, the bank’s shares have suffered, with prices falling this year in stark contrast to the broader market’s recovery.
