TD Bank has agreed to pay over $3 billion in penalties for failing to properly monitor money laundering activities, with the U.S. Financial Crimes Enforcement Network (FinCEN) identifying more than $1 billion in suspicious transactions linked to cryptocurrency exchanges in the United Kingdom and Colombia.
TD Bank’s Penalties and Connection to Crypto
On Oct. 10, 2024, TD Bank’s U.S. division settled charges related to improper monitoring of financial transactions, leading to a record fine and limits on its future U.S. growth. The bank was accused of allowing criminal organizations, including those involved in money laundering, to move illicit funds through its systems.
According to FinCEN’s report, TD Bank processed more than $1 billion in wire transfers associated with two unnamed cryptocurrency firms, with significant involvement from a UK-based crypto exchange and a Colombian financial institution that also offers virtual asset services.
FinCEN’s report detailed how “Customer Group C”, a mysterious entity believed to operate in the sales finance and real estate industries, was involved in these transactions. Notably, over 90% of the incoming funds were from a cryptocurrency exchange based in the UK, and more than 60% of outgoing transactions were sent to a Colombian financial institution involved in virtual assets.
Suspicious Activity and High-Risk Jurisdictions
The volume of these transactions raised red flags. Customer Group C was processing large-scale transactions, averaging $100 million in monthly wire transfers, which appeared to facilitate cryptocurrency trading in high-risk jurisdictions such as Colombia, China, and parts of the Middle East.
Of the total amount, over $650 million was transferred from an international cryptocurrency exchange to TD Bank, with the source and ultimate originators of the funds remaining unclear to the bank. Despite the lack of transparency, TD Bank continued processing the transfers, including facilitating over $420 million in payments to a Colombian financial institution involved in cryptocurrency services.
TD Bank’s Crypto Involvement and Closure of Crypto Unit
TD Bank had previously entered the crypto space through its TD Cowen division, launching a crypto investment arm (Cowen Digital) in March 2022 to provide institutional clients with exposure to digital assets such as Bitcoin and Ether. However, this unit was shut down in June 2023, amidst the broader crypto market downturn and regulatory scrutiny that affected financial institutions dealing with digital assets.
TD Bank’s involvement with cryptocurrency had been brief but notable. The $1.3 billion acquisition of Cowen Bank in August 2022 came three months before the bank decided to close its crypto division. The closure of TD Cowen’s crypto unit came as the crypto market saw major collapses, including the bankruptcies of key exchanges, alongside a regulatory crackdown in the U.S.
Regulatory Fallout
The $3 billion fine and penalties imposed on TD Bank come as part of an ongoing push by U.S. regulators to ensure that financial institutions adhere to anti-money laundering (AML) laws and are not enabling criminal activities through the handling of funds from high-risk sectors like cryptocurrency.
The connection to crypto exchanges in the UK and Colombia underscores the increasing scrutiny of banks that provide financial services to the digital asset industry, particularly when it involves international transactions and unregulated exchanges.
Looking Ahead
The scandal serves as a reminder of the complexities and risks financial institutions face when dealing with cryptocurrencies, especially in jurisdictions with lax regulations. As authorities continue to tighten regulations and enforce penalties, it’s likely that banks and crypto firms will face increased pressure to ensure better compliance with anti-money laundering laws and improve transparency in their financial operations.
For now, TD Bank has agreed to settle the charges, but the bank’s involvement in facilitating crypto-related transactions without proper oversight has drawn the attention of U.S. regulators, and it could lead to broader implications for the crypto industry as a whole.
