Money Laundering | TDs could face tougher penalties

(Toronto) TD Bank Group could be hit with tougher-than-expected sanctions, a banking analyst says, after the release of a report that suggests an investigation against the U.S. financial institution is linked to money laundering, illicit profits from fentanyl.

National Bank analyst Gabriel Dechaine said in a note that the worst-case scenario among the many US investigations facing TD must be reassessed based on information released by the authority on Thursday. The Wall Street Journal.

The portal said the US Department of Justice’s investigation is focusing on how Chinese drug traffickers allegedly used TD to launder at least US$653 million and bribed TD employees to do so.

TD did not directly comment on the article, but said its anti-money laundering protections were inadequate.

“Criminals are constantly trying to use banks to launder money. Unfortunately, our US (anti-money laundering) program has not been able to effectively thwart these activities. This is unacceptable and we must and will do better,” spokeswoman Elizabeth Goldenshtein responded in a statement.

The bank continues to cooperate with law enforcement and regulators, and a comprehensive effort is underway to strengthen its anti-money laundering program, she added.

According to Mr. Dechaine, the seriousness of the charges means that TD could face not only fines far higher than the $500 million to $1 billion that many investors had expected, but also tighter restrictions on its business activities from regulators.

“We believe investors need to place more emphasis on worst-case scenarios for stocks,” he wrote in a note.

Cumulative fines could easily reach $2 billion, while regulators could impose restrictions, including limits on balance sheet growth, that could affect the bank’s operations for years, Dechaine said.

At worst, the problem could erode TD’s future earnings potential by more than $1 billion, he said. He cut his price target for the TSX-listed bank’s stock by nearly 9% to $84.

The drug-trafficking news comes the same week TD announced it had frozen an initial $450 million in its anti-money laundering silver amid an ongoing US regulatory investigation.

The bank said on Tuesday that its negotiations with the three US regulators and the Justice Department were continuing and that it anticipated further financial penalties.

In addition, Canada’s Financial Transactions and Reports Analysis Center fined the bank 9.2 million on Thursday for failing to comply with anti-money laundering and anti-terrorist financing measures.

TD Bank shares fell nearly 6% to $74.80 on the Toronto Stock Exchange on Friday.

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