TD Bank Stock Falls After U.S. Authorities Impose $1.3B Penalty: Retail's Extremely Bearish

NYSE-listed shares of Toronto-Dominion Bank continued to fall on Friday after the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) assessed a record $1.3 billion penalty against the lender. TD Bank is the 10th largest bank in the U.S.

The penalty, which represents the largest fine against a depository institution in U.S. Treasury and FinCEN history, has been levied for violations of the Bank Secrecy Act (BSA), the primary U.S. anti-money laundering (AML) law that safeguards the financial system from illicit use. TD Bank will also face a four-year independent monitorship.

FinCEN Director Andrea Gacki said that for over a decade, TD Bank allowed its AML program to languish, making it a target for illicit actors—including its own employees.

The investigation revealed TD Bank knew that its AML program was neither appropriately designed nor adequately resourced to mitigate the actual illicit finance risks that it faced on multiple fronts.

Among other failures, TD Bank’s processing of peer-to-peer transactions (e.g., Venmo and Zelle), including transactions indicative of human trafficking, was insufficient. As a result, the firm failed to identify and timely report these transactions to FinCEN.

FinCEN said that the bank also allowed significant backlogs of potentially suspicious activity to persist, thereby depriving law enforcement of necessary information. “TD Bank knew that it was the subject of significant funnel account activity involving high-risk countries yet failed to take timely action to address this substantial risk,” it said.

Deputy Secretary of the Treasury Wally Adeyemo said that from fentanyl and narcotics trafficking, to terrorist financing and human trafficking, TD Bank’s chronic failures provided fertile ground for a host of illicit activity to penetrate the financial system.

As part of the settlement, TD Bank will engage an independent consultant, who would conduct a historical analysis of TD Bank’s transaction data to remediate the SAR filings that the lender missed due to its extensive control gaps. The firm has also agreed that the monitor will oversee an independent, end-to-end review of its AML Program.

Following the development, retail sentiment on Stocktwits continued to trend in the ‘extremely bearish’ territory (6/100). The move was accompanied by ‘extremely high’ message volumes.

Stocktwits users are expressing skepticism on the shares.

Also See: BlackRock Stock Rises After Firm Reports Record Inflows And AUM: Retail’s Exuberant

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