Toronto Dominion Bank (NYSE:) stock price fell more than 5% on Thursday following reports of an upcoming $3 billion settlement related to anti-money laundering practices 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 anti-money laundering systems.
The Wall Street Journal said the financial penalties were expected to be implemented because the bank “failed to properly monitor money laundering by drug cartels.”
The expected settlement will include heavy penalties and restrictions on TD’s growth in the United States
As part of the agreement with regulators, the publication says the Office of the Comptroller of the Currency (OCC) is expected to impose an asset cap on TD’s retail trading, preventing any expansion above a certain level.
The WSJ adds that the US Department of Justice (DOJ) and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) will also appoint independent monitors to oversee the bank’s compliance with the terms of the settlement.
FinCEN’s surveillance device is expected to remain in place for four years, according to sources familiar with the matter.
The settlement announced by TD Bank comes on the heels of a serious investigation that revealed deficiencies in its anti-money laundering protocols. The Wall Street Journal said that federal authorities discovered that a Chinese criminal organization laundered millions through TD branches in New York and New Jersey.
The investigation prompted US regulators to scrutinize the bank’s internal controls, ultimately derailing its planned $13.4 billion acquisition of First Horizon (NYSE:) in May 2023.
In light of the regulatory challenges, TD has restructured its AML and Investigations departments, making several key appointments to improve its systems.
Despite these efforts, the bank’s shares have suffered, with shares falling this year, in sharp contrast to the broader market’s recovery.
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