Canadian bank takes US$450mil hit in money-laundering probe
TORONTO: Toronto-Dominion Bank has taken an initial provision of US$450mil in connection with US investigations into its anti-money laundering practices, and says it expects additional penalties to follow.

Canada’s second-largest bank disclosed the charge in a statement after markets closed.

It cautioned that the full cost of the fines it might eventually face is “unknown and not reliably estimable at this time”.

Toronto-Dominion is in discussions with three US regulators plus the Department of Justice to settle the matter. The US$450mil provision is related to talks with just one of those regulators.

Analysts have previously estimated that the bank might ultimately face fines ranging from US$500mil to US$1bil or more and one said on Tuesday that the announcement brings “only limited clarity”.

“We note this is simply a provision and not a definitive amount as such, with Toronto-Dominion hedging expectations in its press release,” Jefferies Financial analyst John Aiken said in a report.

“The remediation clock has not started ticking,” Aiken said, and added that in earlier precedents, it has taken three to 10 years for banks to be clear of restrictions they agree to under consent orders.

“Granted, we do believe that Toronto-Dominion is being proactive and attempting to limit the timeline.”

The bank said in its statement that its “AML programme was insufficient to effectively monitor, detect, report and respond to suspicious activity. Work has been underway to remedy these deficiencies.”

“Toronto-Dominion is a strong institution with the capital, liquidity and capacity to fund the critical effort currently underway to strengthen its AML programme, invest in the business and continue to serve its customers and clients with excellence,” the statement said.

Toronto-Dominion’s deal to buy Memphis-based First Horizon Corp was called off almost a year ago after it became clear that it couldn’t get timely regulatory approval for the deal.

Toronto-Dominion told investors it knows what the problem is and is working to fix it, but said it was unable to share further information.

The stock tumbled for months as investors grew more concerned about whether it might face major restrictions on acquisitions and growth in the United States, on top of a large fine, though it has gained ground in recent weeks.

Shares of Toronto-Dominion have fallen 4.6% this year, which ranks it fifth among Canada’s six largest bank’s.

The lender is spending hundreds of millions of dollars to improve its risk and control systems in the United States.

Toronto-Dominion said it announced the charge on Tuesday because it earlier disclosed it in a US regulatory filing known as a call report.

That filing covers the first three months of the year and does not line up with the bank’s financial second quarter, which ended yesterday, with results due to be reported on May 23. — Bloomberg
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Toronto-Dominion Bank has taken an initial provision of US$450mil in connection with US investigations into its anti-money laundering practices, and says it expects additional penalties to follow.