Toronto-Dominion Bank says it’s been receiving inquiries from regulators and law enforcement about its compliance with anti-money-laundering rules, including requests related to a US Department of Justice investigation.
(Bloomberg) — Toronto-Dominion Bank says it’s been receiving inquiries from regulators and law enforcement about its compliance with anti-money-laundering rules, including requests related to a US Department of Justice investigation.
Canada’s second-largest bank made the disclosure in its third-quarter financial results Thursday, saying it may face penalties as a result of the probe.
“The bank is cooperating with such authorities and is pursuing efforts to enhance its Bank Secrecy Act/anti-money-laundering compliance program,” the Toronto-based company said. “While the ultimate outcomes of these inquiries and investigations are unknown at this time, the bank anticipates monetary and/or non-monetary penalties to be imposed.”
A spokesperson for the Justice Department declined to comment. Toronto-Dominion executives didn’t elaborate on the nature of the investigation during a conference call with analysts.
Shares in the bank closed down 3.1% in Toronto.
Toronto-Dominion had a deal to buy Tennessee-based First Horizon Corp., but the transaction fell apart in May after the bank said it couldn’t secure timely approval from regulators. The acquisition was held up by concerns about Toronto-Dominion’s handling of suspicious customer transactions, a person familiar with the matter told Bloomberg News at the time. The regulators’ concerns were related to anti-money-laundering practices, the person said.
Read More: Toronto-Dominion Shares Slide as Deposit Costs Crunch Earnings
The decision to walk away from the $13.4 billion deal shocked markets even though the acquisition had looked shaky since early March, when the Memphis-based lender disclosed that Toronto-Dominion had said it didn’t believe it could get regulators to sign off by a May 27 deadline. It would have been Toronto-Dominion’s largest deal ever, adding more than 400 bank branches in the US Southeast.
Toronto-Dominion could “easily afford to pay” any fines stemming from the investigations it just disclosed, according to Gabriel Dechaine, an analyst at National Bank of Canada.
“However, we believe the potential reputational hit, along with potentially higher compliance costs and capital requirements — via higher operational RWA — are important considerations,” Dechaine said in a note.
–With assistance from Stephanie Hughes and Ben Bain.
(Adds TD executives declining to elaborate in fourth paragraph. An earlier version corrected the share price decline in the fifth paragraph.)
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