Achi news desk-
TD Terrace building in Toronto’s financial district on March 4.Fred Lum/The Globe and Mail
In January, 2021, US law enforcement authorities stopped a suspicious box truck and a Lexus SUV on the streets of Queens, New York, their guess was that a criminal team was out to launder drug money.
Starting in a supermarket parking lot, a man and a woman got into a truck carrying three bags, then they drove to a bank parking lot where a Lexus SUV pulled up. Bags were exchanged between the vehicles and the box truck left.
A short time later, the woman, Yunqin Liu, took a bag from the SUV and entered the bank, where she made a large cash deposit. Then she went to another branch of the same bank and did it again. Then deposited even more at another branch.
Four months later, US authorities charged six people with money laundering, leading to the main defendant, David Sese, pleading guilty. Throughout the proceedings, authorities never named Queens Bank, only referring to it as FI-1. But on Thursday The Globe and Mail reported that the financial institution was Toronto-Dominion Bank, and the disclosure shed light on a years-long investigation that dogged Canada’s second-largest lender.
“I regret that there have been serious instances where the bank’s AML program failed and did not monitor, detect, report or respond effectively,” TD CEO Bharat Masrani said in a statement Friday. “This is unacceptable and inconsistent with our values.” .
Although TD is not the only financial institution linked to the money laundering operation, the amount of money involved is staggering. US authorities believe the criminal ring made more than $2 million worth of transactions on that day in January, and that it laundered $653 million between 2016 and 2021.
The big question now: Will TD ever get its premium back?
Last year, TD disclosed it was under an anti-money laundering (AML) investigation after U.S. regulators blocked its $13.4 billion takeover of Memphis, Tenn.-based First Horizon Corp., but until Thursday investors and analysts had never been seen. All the fuss over the outcome. The working theory was that TD would pay a fine, but nothing untoward, and its expansion in the United States, its main growth market, would be limited for the foreseeable future.
That narrative is changing now—fast. “We believe TD could not only face a higher-than-expected fine, but also restrictions imposed by the regulator on its business activities,” Gabriel Dechaine, banking analyst at National Bank Financial, wrote in a note to clients.
For months, analysts had predicted a fine in the $500 million to $1 billion range, but that has now jumped. “We believe cumulative fines could easily reach $2 billion,” Mr. Dechaine wrote.
TD shares lost 5.8% in Toronto on Friday as investors digested the potential for more pain.
For months, investors and analysts wondered whether U.S. authorities were concerned about multiple AML violations at TD over a long period of time, which could soften the financial blow, or whether there was a major new event that would result in much tougher enforcement. The revelation of TD’s involvement in a major money laundering operation which spanned three states—New York, New Jersey, and Pennsylvania—suggests the latter.
Also, US President Joe Biden has escalated his administration’s attack against the laundering of illegal drug profits through the financial system, especially when it comes to fentanyl.
TD, then, is at the center of a geopolitical firestorm spanning China, which often supplies the chemicals for the drugs, Mexico, which manufactures the drugs and transports them to the U.S., and Russia, whose feet are reportedly deeply embedded in Mexican crime groups.
Susan Gibson, the special agent in charge of the New Jersey Division of the Drug Enforcement Administration, said in a 2022 statement that the money laundered by Mr. Sa’s criminal network allowed “drug traffickers to expand their operations across the United States and around the world.” She added that the money laundered Such helps drug cartels flood the streets of the US with “deadly poison”, and contributes to the high number of overdose deaths.
Until this week, TD had said little about its AML shortcomings and what it was doing to fix the problem, but on Friday CEO Bharat Masrani used stronger language in a statement. Not only did he acknowledge serious problems, he added: “Criminals are ruthlessly targeted Financial institutions to launder money and TD has a responsibility and obligation to thwart their illegal activities.”
Prior to assuming the position of CEO in 2014, Mr. Masrani was head of TD’s US division, as well as chief risk officer for the entire bank.
On Friday, TD also disclosed that it invested $500 million in upgrading its AML systems and revamped its AML team in Canada and the U.S., hiring hundreds of new AML professionals “with deep expertise in program planning, oversight and execution.” ” The Globe reported in January that TD hired Herb Mazariegos as its global head of AML, and other hires include a head of US high-risk investigations, a head of financial crime risk management and a global head of sanctions.
The new team is investing in enterprise-wide AML training, as well as AML programs for new hires. The U.S. Financial Crimes Enforcement Network (FinCEN) has warned for years that drug traffickers are using sophisticated methods to launder their money, making it much harder to track — not just for banks, but for law enforcement as well.
Criminal rings now use “a wide variety of innovative methods that avoid international wire transfers and pose special obstacles for law enforcement,” Wanda Plebab-Brown, a senior fellow at the Brookings Institution in Washington, D.C., warned at a U.S. Senate hearing in March.
Mr. Sze’s crime team used these money laundering tactics to evade TD’s AML monitoring systems, and it also used bribes. When he pleaded guilty, he admitted to using various inducements to bribe bank officials, including gift cards, which helps explain why large cash deposits could be made.
In one instance, law enforcement found one of the ring’s members carrying multiple heavy briefcases up to the teller window at an unnamed financial institution, after which Mr. Seza walked over and took out many long stacks of U.S. currency and placed them on the counter. processed.
The crime team also relied on cashier’s checks to launder the money through business accounts they managed for companies including Queens Sewing 43 Inc. and Asia Sewing Corp.
Unlike personal checks, which are sometimes held for several days to verify the details of the transaction, cashier’s checks are guaranteed by the bank. This means that whoever redeemed them does not have to wait for the checks to finish. Mr. Seza earned a fee of about 1 to 2 percent of the money he laundered, according to the Justice Department.
While financial institutions played a prominent role in the criminal complaint against Mr. Seza, the Justice Department acknowledged that the money was Laundered by various means, including in slot machines in casinos, where there is dirty money Converted to tickets, then the tickets are returned to new currency.
Although Mr. Sze pleaded guilty, he was granted bail at US$500,000. He has not yet been sentenced, but he surrendered his passport and his movement is restricted to New York and New Jersey.
With files from Tu Thanh Ha
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