TD Bank’s $3B AML Deal Sparks Scrutiny Of Its Oversight

The long-standing, widespread compliance failures at the root of TD Bank’s blockbuster $3 billion U.S. anti-money laundering settlement last week have stunned experts and brought tough punishment for the Canadian bank — but they’re also raising questions about why regulators didn’t act sooner.

The agencies’ consent orders with TD also offer scant clues about what its regulators knew and when, although Megan Kilzy of Cole Schotz PC speculated that the bank’s faulty system for identifying and preventing potentially illicit transactions may have helped delay its day of reckoning.

“If you don’t have a robust AML program, it makes it more difficult to have meaningful communications with regulators,” Kilzy told Law360.

Kilzy, who headed up the financial crimes unit of the Bergen County Prosecutor’s Office in New Jersey and is now a member in Cole Schotz’s white-collar criminal defense and government investigations practice, said transaction monitoring deficiencies could have created an information gap for TD and its regulators, keeping problematic activity in the dark for longer.

“I don’t think that obfuscates the responsibility of the regulators here,” Kilzy said. “They should absolutely be trained and actively engaged with recognizing a deficient system.”

Still, when TD Bank’s system fell so far short, “it seems that it would have been difficult for regulators to stay in contact with representations from TD Bank and have ongoing conversations with the bank the way that AML and [Bank Secrecy Act] officers are supposed to have,” Kilzy said.

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