TD Bank will pay $3 billion to settle allegations that it failed to adequately supervise money laundering by drug gangs, officials stated Thursday.

The fine includes a $1.3 billion penalty to the US Treasury Department’s Financial Crimes Enforcement Network, which is a bank-record fine. TD also expects to pay $1.8 billion to the US Justice Department and plead guilty to end the US government’s investigation into the bank’s violations of the Bank Secrecy Act and money laundering.

The US Department of Justice claimed in a statement that TD Bank has “long-term, pervasive, and systemic deficiencies” in its transaction monitoring methods. The Wall Street Journal first broke the news late Wednesday.

TD Bank Hit With Record $3 Billion Fine Over Drug Cartel Money Laundering

“By making its services convenient for criminals, it became one,” Attorney General Merrick Garland stated at a press conference on Thursday.

More than 90% of transactions went unmonitored between January 2018 and April 2024, allowing “three money laundering networks to collectively transfer more than $670 million through TD Bank accounts,” according to a judicial complaint.

“I want to be clear, these systemic failures did not just create hypothetical vulnerabilities, but they resulted in actual, material harm to American citizens and communities,” said Deputy Treasury Secretary Wally Adeyemo. “TD Bank, unlike its counterparts, has repeatedly put growth and profit over legal compliance. “The bank facilitated drug trafficking.”

In one case, TD Bank workers collected over $57,000 in gift cards to process more than $470 million in cash deposits from a money laundering network in order to “ensure employees would continue to process their transactions” and not reveal them in necessary reports, according to the DOJ.

In a separate statement, the Office of the Comptroller of the Currency (OCC), a US banking regulator, stated that TD handled hundreds of millions of dollars in transactions that clearly suggested extremely suspicious conduct.

“This is a difficult chapter in our bank’s history,” Bharat Masrani, CEO of TD Bank, stated. “These failures took place on my watch as CEO and I apologize to all our stakeholders.”

“We have taken full responsibility for the failures of our US [anti-money laundering] program and are making the investments, changes and enhancements required to deliver on our commitments,” Masrani told reporters.

TD is stepping up its anti-money laundering surveillance efforts, including the hiring of over 700 new specialists with “experience and qualifications in money laundering prevention, financial crimes, and AML remediation,” as well as the implementation of new processes to “better prevent, detect, and measure financial crime risk,” the bank stated.

FinCEN will monitor the Canadian bank for four years to guarantee compliance with the arrangement.

The US Federal Reserve also penalized TD Bank and ordered that its anti-money laundering compliance division be relocated to the United States.

And, as part of the agreement, the OCC limits TD Bank’s growth in the United States. Although remarkable, the US government’s monitoring and restriction of a bank’s expansion is not uncommon. Wells Fargo was hit with similar growth limits and large penalties for “widespread consumer abuses” in 2018, but has yet to persuade regulators to lift the asset cap. Wells Fargo already revealed that its employees responded to drastically unrealistic sales targets by creating up to 3.5 million bogus accounts.

The severe penalties imposed by regulators on Thursday caught Wall Street off guard. TD Bank’s (TD) US-listed shares fell 6% as investors expect more litigation costs and slower growth.

TD assured that it had sufficient liquidity to pay the penalties and continue operations. In a call with analysts, the bank stated that it expects a one-time charge of $1.5 billion after taxes and will cut 10% of its assets to cover the huge penalties.

TD Bank Hit With Record $3 Billion Fine Over Drug Cartel Money Laundering

“We believe that the market was becoming increasingly comfortable with the idea that there would be no growth restrictions imposed on TD,” wrote John Aiken, analyst at Jefferies, in a note to investors on Thursday. “TD will need to find a new avenue for growth from its traditional reliance on US retail banking.”

Cartel fears
Officials at the Justice and Treasury departments have grown more concerned about Mexican cartels’ use of the US banking system to launder earnings from the sale of fentanyl and other drugs, which kill tens of thousands of Americans each year.

Couriers laundering money for the cartels “are opening accounts in banks big and small here in the US,” a senior Treasury official told CNN in May.

Treasury and IRS authorities began briefing US banks and social media companies earlier this year in an effort to gain a better understanding of how the cartels are exploiting the financial system, CNN reports.

According to the Treasury source, one of the talks’ main topics will be how to leverage intelligence offered by smaller banks that can detect laundering fronts in their communities.

Some critics, including Democratic Massachusetts Senator Elizabeth Warren, said that the punishments were insufficient given the gravity of the allegations.

“Big banks treat government fines as the cost of doing business,” Warren stated in a statement. “This deal absolves irresponsible bank management of the responsibility for allowing TD Bank to be used as a criminal slush fund. The Department of Justice and the Office of the Comptroller of the Currency must do better in implementing our anti-money laundering legislation.”

Last year, TD Bank paid $1.2 billion to settle a lawsuit alleging its role in an infamous $7 billion Ponzi scheme conducted by convicted financier Allen Stanford over a decade ago.

The funds were used to repay victims of the scheme, but the bank denied any wrongdoing.

SOURCE | CNN

A federal judge ruled that the Federal Trade Commission can proceed with its blockbuster antitrust lawsuit against Amazon. However, he did give the firm a modest victory by dismissing a few allegations made by states interested in the legal dispute.

The order, granted last week by Judge John H. Chun and unsealed on Monday, is a significant defeat for Amazon, which has attempted for months to have the lawsuit dismissed in court. A trial in the case is scheduled for October 2026.

“We are pleased with the court’s decision and look forward to moving this case forward,” FTC spokesperson Doug Farrar said in a prepared statement. “The ways Amazon illegally maintains its monopolies and the harm they cause—including suppressed competition and higher prices for shoppers and sellers—will be on full display at trial.”

Judge Rules The FTC Can Proceed With Antitrust Lawsuit Against Amazon, Tosses Out Few State Claims

The FTC and the attorneys general of 18 states, including Puerto Rico, have sued the e-commerce juggernaut, alleging that it is abusing its market position to raise prices on and off its platform, overcharge vendors, and discourage new competitors.

The case, filed in September 2023, is the culmination of a years-long probe of the company’s operations and is one of the most major legal challenges to Amazon in its almost 30-year history.

US authorities and state attorneys general have accused the online retailer of breaking federal and state antitrust and consumer protection laws.

Judge Chun of the United States District Court for the Western District of Washington issued the ruling allowing the federal challenges and many of the state claims to proceed. However, he dismissed some allegations filed by New Jersey, Pennsylvania, Oklahoma, and Maryland under state antitrust or consumer protection statutes.

Amazon, for its part, expressed confidence that it could prove its claim in court as the matter moves forward.

“The ruling at this early stage requires the court to assume that all of the facts asserted in the complaint are accurate. They are not,” Tim Doyle said in a statement, adding that the agency’s case “falsely” alleges people only shop for household products on prominent websites such as Walmart.com, Target.com, Amazon, and eBay.

Judge Rules The FTC Can Proceed With Antitrust Lawsuit Against Amazon, Tosses Out Few State Claims

“Moving forward the FTC will have to prove its claims in court, and we’re confident those claims will not hold up when the FTC has to prove them with evidence,” Doyle said to the press. He also stated that the FTC’s strategy “would make shopping more difficult and costly.”

The FTC is also targeting Meta Platforms for alleged monopolistic actions, while the Department of Justice has sued Apple and Google with some success.

In August, a federal judge declared that Google’s ubiquitous search engine is improperly using its power to impede competition and innovation.

SOURCE | AP

NEW YORK — The United States Justice Department has launched an antitrust case against Visa, claiming that the financial services behemoth uses its size and dominance to hinder competition in the debit card market, costing consumers and companies billions of dollars.

According to the complaint filed on Tuesday, San Francisco-based Visa penalizes retailers and banks that do not use Visa’s own payment processing system to execute debit transactions, despite the availability of alternatives. Visa earns an additional fee for each transaction processed through its network.

According to the DOJ’s complaint, Visa’s debit network processes 60% of all transactions in the United States, allowing the company to earn more than $7 billion in fees each year.

“We allege that Visa has unlawfully amassed the power to extract fees far exceeding what it could charge in a competitive market,” said Attorney General Merrick B. Garland in a statement. “Merchants and banks pass on the expenses to customers, either by raising prices or lowering quality or service. As a result, Visa’s illegal behaviour affects not just one thing, but almost everything.”

Department Of Justice Sues Visa, Alleges The Card Issuer Monopolizes Debit Card Markets

According to Julie Rottenberg, Visa’s general counsel, the case fails to consider the “ever-expanding universe of companies offering new ways to pay for goods and services.”

“Today’s lawsuit ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving,” Rottenberg told reporters. She went on to say that the case is “meritless” and that the corporation will defend itself “vigorously.”

The Biden administration has aggressively pursued U.S. corporations claiming to function as intermediaries, such as Ticketmaster parent Live Nation and real estate software company RealPage, accusing them of burdening Americans with absurd fees and anti-competitive behavior. The administration has also charged tech behemoths like Apple and Google with monopolistic behavior.

“In some of the Justice Department’s antitrust enforcement actions, the harm caused by the alleged illegal conduct is more visible: higher prices for air travel, concert tickets, and smartphones,” Garland stated during a news conference in Washington on Tuesday. “The harmful effects of Visa’s alleged anticompetitive conduct is less visible, but they are no less harmful.”

According to the DOJ case, filed in the United States District Court for the Southern District of New York, Visa uses the huge number of transactions on its network to impose volume commitments on merchants, their banks, and financial institutions that issue debit cards. This makes it difficult for merchants to employ alternatives to Visa’s payment processing technology, such as lower-cost or smaller payment processors, without facing what the DOJ described as “disloyalty penalties” from Visa.

The DOJ said that Visa also suppressed competition by paying to cooperate with potential competitors.

In 2020, the DOJ filed a lawsuit to prohibit the company’s $5.3 billion acquisition of financial technology startup Plaid, claiming it was a monopolistic takeover of a prospective competitor to Visa’s omnipresent payment network. That acquisition was later called off.

Visa previously revealed that the Justice Department was investigating the business in 2021, stating in a regulatory filing that it was participating in the DOJ probe into its debit operations.

Department Of Justice Sues Visa, Alleges The Card Issuer Monopolizes Debit Card Markets

Since the epidemic, more consumers worldwide have been purchasing online products and services, resulting in increased revenue for Visa in the form of fees. Even historically cash-heavy establishments such as pubs, barbershops, and coffee shops have begun to accept credit or debit cards as payment, typically through cellphones.

In a note to investors, KBW analyst Sanjay Sahrani estimated that U.S. debit revenue is likely to account for only approximately 10% of Visa revenue.

“Some subset of that may be lost if there is a financial impact,” he indicated. Visa said: “U.S. consumer payments business is the slowest growing piece of the aggregate business, and to the extent its contribution is affected, it is likely to have a very limited impact on revenue growth.”

He also stated that if the lawsuit is not settled and goes to trial, it may last years.

During the quarter ending June 30, Visa handled $3.325 trillion in transactions on its network, a 7.4% increase over the previous year. U.S. payments increased by 5.1%, outpacing U.S. GDP growth.

Visa stock lost $15.85, or 5.5%, to end at $272.94 on Tuesday.

SOURCE | AP