TD Bank last month became the largest bank in U.S. history to plead guilty to Bank Secrecy Act program failures and to conspiracy to commit money laundering.
The dubious distinction came with agreements to pay more than $3 billion in penalties — the largest penalty ever imposed under the act.
Internal bank communications showed that employees knew lax internal policies made TD Bank, the nation’s 10th-largest bank, an easy solution for criminal networks.
What’s not known: How the malfeasance became public.
The Bank Secrecy Act and Anti-Money Laundering Act allow for whistleblower awards, similar to other government whistleblower programs that reward original tips leading to penalties. They also protect from retaliation whistleblowers who bring complaints to the government, as well as complaints within a company. Part of the draw of the whistleblower program is its anonymity.
Plenty of TD Bank employees knew the bank was violating the law; some even accepted bribes or helped launder narcotics proceeds.
Even if there was no whistleblower behind this settlement, the TD Bank example could inform employees of other banks how to confidentially hold banks accountable for criminal activity. It’s unlikely that TD Bank was alone in efforts to work around this law.
In fact, The Wall Street Journal has reported the Justice Department and other government agencies are investigating Morgan Stanley’s vetting procedures to determine whether it has sufficient anti-money-laundering controls. A recent Journal article uncovered internal bank documents that describe the bank’s failure to complete due-diligence reviews, such as allowing a “self-proclaimed princess claiming to have more than $5 billion in assets … to engage Morgan Stanley for weeks without the bank carrying out a basic background check.”
There were multiple red flags at TD Bank, according to the U.S. Department of Justice:
- The bank didn’t update its anti-money laundering compliance program for more than a decade. Rather, senior executives enforced a flat internal budget, despite the bank’s significant growth. Its program looked sufficient on paper but in reality had tremendous flaws.
- During the past decade, the bank’s federal regulators and its internal audit group repeatedly brought up concerns about its transaction monitoring program, which helps pinpoint suspicious activities. But the program didn’t change and had anemic staff and funding.
- The bank didn’t monitor approximately $18.3 trillion of transaction activity, including that involving high-risk countries. It even told stores to stop filing internal unusual transaction reports on certain suspicious customers. It also allowed more than $5 billion in transactional activity in accounts even after the bank decided to close them.
- Three money-laundering networks collectively transferred more than $670 million through TD Bank accounts between 2019 and 2023. In one scheme, employees received gift cards worth more than $57,000 as bribes to continue processing suspicious transactions. The DOJ has charged more than two dozen people related to the schemes.
Individuals in possession of information that would expose a fraud like this need to trust their instincts. If you see something, say something. Keller Grover often helps those who suspect wrongdoing, providing confidential, free consultations. We advise clients about the best path forward from the very beginning, helping minimize the impact of reporting, consider potential rewards, protect their rights and achieve the best possible outcomes.