TORONTO — TD Bank Group could face stiffer penalties than previously expected after reports that the investigation it faces in the U.S. is related to laundering of illegal fentanyl profits, a banking analyst said. He said he could be fined.
National Bank analyst Gabriel Deschaine said Thursday’s Wall Street Journal report on the link forced him to reassess the worst-case scenario of multiple U.S. investigations facing TD. I mentioned it in my notes.
The newspaper reported that a US Department of Justice investigation revealed how Chinese drug traffickers allegedly used TD to launder at least US$653 million in money and bribed TD employees to do so. He said he is focusing on
TD did not directly confirm the report, but said anti-money laundering measures were inadequate.
“Criminals persistently target financial institutions to launder money, and TD has a responsibility and obligation to stop this illegal activity,” CEO Bharat Masrani said in a statement late Friday. ” he said.
“We regret that there have been significant instances where a bank’s AML program was inadequate and failed to effectively monitor, detect, report and respond. This is unacceptable and inconsistent with our values. .”
The bank said a comprehensive review of the program is well underway, with more than $500 million already spent to repair the program and strengthen the platform.
Dechaine said the seriousness of the allegations not only means TD could face fines far exceeding the $500 million to $1 billion that many investors are predicting, but also regulatory requirements. It said it meant tougher restrictions on business activity could also be imposed by authorities.
“We believe investors need to place more weight on the worst-case scenario for stock prices,” he said in a note.
Dechaine said cumulative fines could easily reach $2 billion, and regulators could introduce restrictions such as limits on balance sheet expansion, which could affect bank operations for several years. He said that there is a sex.
He said that in a worst-case scenario, the issue could hurt TD’s future earnings potential by more than $1 billion, and lowered his price target for the bank’s TSX-listed shares by nearly 9% to $84.
The drug trafficking link comes in the same week that TD announced it had received an initial provision of US$450 million in connection with an ongoing US regulatory investigation into its anti-money laundering compliance program. It was revealed that.
The bank announced Tuesday that discussions are ongoing with three U.S. regulators and the Department of Justice, and additional fines are expected.
Separately, Canada’s financial crime watchdog Fintrack on Thursday fined the bank $9.2 million for non-compliance with anti-money laundering and anti-terrorist financing regulations.
TD Bank shares fell about 6 per cent to $74.80 on the Toronto Stock Exchange on Friday.
This report by The Canadian Press was first published May 3, 2024.
Companies featured in this article: (TSX:TD)
Ian Bikis, Canadian Press
