By Nivedita Balu
TORONTO (Reuters) – TD Bank is preparing to install U.S. government-ordered monitors and has moved to reassure employees that it had enough resources to comply with laws prohibiting money laundering, according to two sources familiar with the situation.
TD became the largest bank in U.S. history to plead guilty to violating a federal law aimed at preventing money laundering, and agreed to pay over $3 billion in penalties to resolve the charges in September.
Regulators said TD ignored red flags from high-risk customers and created a "convenient" environment for bad actors to exploit, including facilitating over $400 million in transactions to launder funds on behalf of people selling fentanyl and other deadly drugs and employees taking bribes from criminal gangs.
The lender is in the process of finding a monitor, typically a third-party consultant or law firm, to observe its operations, track its progress on risk and controls, and report to regulators, according to one of the sources, who declined to be identified discussing compliance matters.
In a town hall with staff this month, U.S. CEO Leo Salom said the bank had enough capital, liquidity and leadership dedicated to fixing the AML program and risk controls, the source added.
TD appointed Michelle Myers as its global chief auditor, effective Dec. 9, it said on Friday.
Along with the fines, U.S. regulators punished TD with a rare asset cap that limits the bank's growth. The Office of the Comptroller of the Currency also required TD to undergo independent monitoring for four years and prevented the bank from opening a new branch or entering a new market without approval.
Salom told staff that the bank's main priority was enhancing its AML program and meeting its obligations, the first source said.
TD has spent $500 million to tighten its AML program and risk controls this year. It also hired several key executives, including the head of global AML Herbert Mazariegos from Bank of Montreal and Chief Compliance Officer Erin Morrow from Citigroup (NYSE:C).
TD has focused on training programs, including using real-life examples and simulations, to help staff identify red flags.
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