Toronto-Dominion Bank (TD) has announced that it is actively pursuing a global resolution, including monetary and monetary penalties, in relation to civil and criminal investigations into its U.S. Bank Secrecy Act/anti-money laundering (AML) program.
These investigations involve scrutiny by its U.S. prudential regulators, the Financial Crimes Enforcement Network, and the U.S. Department of Justice, said a news release by TD Bank Group. TD anticipated that it would finalize a resolution by the end of the calendar year.
As part of its efforts to resolve these issues, TD has taken an additional provision of US$2.6 billion in its third-quarter financial results to cover anticipated fines and penalties, the news release said. This amount reflected the bank's current estimate of the total financial impact of the ongoing investigations.
In addition to the allocation for potential penalties, TD also disclosed in the news release that it sold 40.5 million shares of common stock in The Charles Schwab Corporation. This sale reduced TD’s ownership interest in Schwab to 10.1 percent from 12.3 percent. The bank agreed not to sell any additional Schwab shares for 45 days, subject to certain exceptions. TD stated that it had no plans at present to divest further shares.
The impact of the US$2.6 billion provision will result in a Common Equity Tier 1 (CET1) ratio of 12.8 percent as of July 31, the news release explained. This provision will further decrease TD's CET1 ratio by 35 basis points in the fourth fiscal quarter due to an increase in operational risk. The sale of Schwab shares will counterbalance this with an expected increase of 54 basis points in the CET1 ratio, likewise in the fourth quarter.
Bharat Masrani, group president and chief executive officer of TD Bank Group, acknowledged the seriousness of the deficiencies in the bank’s U.S. AML program. In the news release, Masrani assured that the work that TD needed to do to comply with its obligations and duties was of “paramount importance” to the bank’s boards and senior leaders.
Masrani emphasized that TD's remediation program was already in progress. In the news release, Masrani highlighted the bank's efforts to improve its U.S. AML program by bringing in industry leaders from regulatory agencies, law enforcement, and government, as well as investing in data, technology, training, and process design.
“We are building stronger foundations for our U.S. business, where 30,000 colleagues proudly serve more than 10 million Americans from Maine to Florida,” said Masrani in the news release. “TD continues to work constructively with our regulators and law enforcement towards resolution of our U.S. AML matters and looks forward to bringing additional clarity to our shareholders, clients and other stakeholders.”