“TD Bank Hit with $37.5 Million Penalty for Compliance Failures”

BREIF INTRO: TD Bank, with over 1,300 domestic locations and a foreign branch, had $212 billion in assets and about 25,000 employees. As a subsidiary of The Toronto-Dominion Bank, it was regulated by the OCC. The OCC found that TD Bank violated the Bank Secrecy Act from April 2008 to September 2009, resulting in a $37.5 million civil penalty.

WHAT WENT WRONG?

1. UNFILED SAR’s: The Financial Crimes Enforcement Network found that TD Bank failed to timely report suspicious activities from April 2008 to September 2009, violating the Bank Secrecy Act. During this time, Scott Rothstein ran a Ponzi scheme using TD Bank accounts. Rothstein, who pleaded guilty to racketeering and was sentenced to 50 years in prison in 2010, deceived investors with fake settlement agreements and used TD Bank accounts to give a false sense of legitimacy. He manipulated bank statements and lock letters to mislead investors. The Bank Secrecy Act required banks to report suspicious transactions of $5,000 or more. TD Bank failed to report such activities or detect suspicious transactions in Scott Rothstein’s accounts, which handled around $4 billion, including Ponzi scheme funds. In 2011, TD Bank reviewed these transactions and filed five late SARs for $900 million in suspicious activity. Inadequate policies, procedures, and training led to the failure to recognize and report the suspicious activity despite multiple alerts over 17 months.

CIVIL MONEY PENALTY: The Financial Crimes Enforcement Network had determined that a civil money penalty in the amount of $37.5 million is warranted for TD Bank’s violations of the Bank Secrecy Act.

LESSONS LEARNED:

Key learnings for other financial institutions:

1. Compliance Was Non-Negotiable

2. Timely Reporting Was Essential

3. Customer Due Diligence Could Not Be Overlooked

4. Effective Use of Technology

5. Regular Audits and Reviews Were Necessary

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