Toronto-Dominion Bank is facing significant financial penalties due to failures in its money-laundering controls. The bank has set aside $2.6 billion to cover the expected fines, including a $450 million provision announced earlier this year. With a global resolution anticipated by the end of the calendar year, Toronto-Dominion is taking steps to address its compliance lapses and ensure future regulatory compliance.
To fund these fines, the Canadian lender has sold part of its stake in Charles Schwab Corp. Toronto-Dominion’s ownership interest in Schwab will decrease from 12.3% to 10.1% after selling 40.5 million shares of the discount broker. The shares were marketed at a potential discount of up to 5% to Wednesday’s closing price, representing a strategic move by Toronto-Dominion to mitigate the financial impact of its compliance issues.
Chief Executive Officer Bharat Masrani emphasized the importance of addressing the bank’s deficiencies in its anti-money laundering (AML) program. Despite facing scrutiny and allegations related to bribery, Toronto-Dominion is committed to fulfilling its obligations and responsibilities to regulators and stakeholders.
The bank’s $13.4 billion deal to acquire First Horizon Corp. was derailed last year amid regulatory uncertainties and inquiries from US authorities. Allegations of money laundering and financial crimes at several US branches have prompted federal prosecutors to file cases against branch employees in multiple states. In response, Toronto-Dominion has made leadership changes and taken steps to improve its AML controls.
Analysts have noted that Toronto-Dominion could face additional penalties beyond monetary fines, potentially impacting its growth and acquisition strategies in the US. Despite the financial provision impacting its capital ratios, the bank remains above the minimum regulatory requirements set by Canada’s bank regulator.
As the situation continues to unfold, investors and industry observers are closely monitoring Toronto-Dominion’s response to its compliance challenges and the potential implications for its operations in the US market. Stay tuned for updates on this developing story as Toronto-Dominion navigates the aftermath of its money-laundering lapses.
(Source: Bloomberg)