Toronto Dominion Bank Stock Plummets Amid Reports of Significant U.S. Fine

Toronto Dominion Bank (NYSE: TD) saw its stock drop over 5% on Thursday following reports of an impending $3 billion settlement concerning its anti-money-laundering practices in the United States.

According to a report, the bank’s U.S. division is expected to admit guilt to charges of not implementing adequate systems to address money laundering issues. The financial penalties are anticipated due to the bank’s failure to effectively monitor money laundering activities linked to drug cartels.

As part of the settlement, substantial fines and restrictions on the bank’s growth in the U.S. market are expected. Regulatory authorities are likely to impose an asset cap on TD’s retail business, limiting its ability to expand beyond a specified threshold.

Additionally, the U.S. Department of Justice and the Financial Crimes Enforcement Network are set to appoint independent monitors to ensure compliance with the settlement terms. It is expected that the monitor from Financial Crimes Enforcement Network will be in place for four years.

The proposed settlement follows a significant investigation that revealed shortcomings in TD’s anti-money-laundering protocols. Federal authorities had found that a Chinese criminal organization was able to launder millions through TD branches located in New York and New Jersey.

This investigation led to increased scrutiny of the bank’s internal controls, ultimately affecting its plans to acquire First Horizon, a $13.4 billion deal that was put on hold in May 2023 due to regulatory concerns.

In response to these regulatory hurdles, TD has begun to restructure its anti-money-laundering and investigative divisions, making several key appointments to enhance its systems. However, despite these initiatives, the bank’s stock performance has declined this year, in stark contrast to the broader market’s recovery.