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The 10th-largest bank in the U.S. agreed to pay $3 billion in fines for its anti-money laundering deficiencies

Toronto-Dominion Bank was hit with a total of $3.09 billion in fines from U.S. regulators and agreed to a limit on its growth after pleading guilty to failing to curb financial crimes in its systems.

Over the course of six years, Canada's second-largest bank failed to monitor $18.3 trillion in customer activity in the United States. In its plea agreement, TD Bank (TD) admitted that this allowed three money laundering networks to transfer over $670 million through the bank's accounts.

"By making its services convenient for criminals, it became one," U.S. Attorney General Merrick Garland said in a press briefing. "Today, TD Bank became the largest bank in U.S. history to plead guilty to Bank Secrecy Act Program failures and the first bank in history to plead guilty to conspiracy to commit money laundering." The Wall Street Journal first reported the agreement on Wednesday.

The bank agreed to pay a record $1.3 billion to the Treasury Department's Financial Crimes Enforcement Network, or FinCEN. The Office of the Comptroller of the Currency slapped a cease and desist order and a $450 million civil penalty on TD Bank Thursday over its inadequate Bank Secrecy Act (BSA) and anti-money laundering (AML) compliance program. And the Federal Reserve Board imposed a $123.5 million penalty.

"The vast majority of financial institutions have partnered with FinCEN to protect the integrity of the U.S. financial system," said Deputy Secretary of the Treasury Wally Adeyemo. "TD Bank did the opposite. 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 our financial system."

TD Bank's U.S. business will also be subject to a $434 billion asset cap.

In addition to the monetary penalties, the Fed will require TD Bank to establish a new office in the United States dedicated to fixing these deficiencies and relocating its anti-money laundering compliance program to the U.S. The bank's compliance with the orders will be overseen by Canada's Office of the Superintendent of Financial Institutions.

Sen. Elizabeth Warren criticized the agreement in a post on X (formerly Twitter) Thursday. "This settlement lets bank executives off the hook for allowing TD to be used as a criminal slush fund," Warren said.

TD Bank has a significant U.S. presence, with more than 1,100 locations across the country. It's the seventh-largest U.S. bank by deposits and the tenth-largest by total assets.

The U.S. Bank Secrecy Act was created in 1970 to regulate how financial institutions detect and prevent money laundering through their systems, also known as Anti-Money Laundering laws, or AML. Under the act, all financial institutions follow a set of guidelines known as KYC (Know Your Customer/Client) — a process that these firms use to verify the identity of, and risks from, potential clients.

TD Bank also agreed to a three-year monitorship and a five-year probation term.

"TD Bank's persistent prioritization of growth over controls allowed its employees to break the law and facilitate the laundering of hundreds of millions of dollars," said Acting Comptroller of the Currency Michael Hsu in a statement. "The bank's blatant risk management failures attracted illicit actors and are egregious and unacceptable."

As a result, "hundreds of millions of dollars in illicit proceeds" were laundered through TD Bank's U.S. business.

The penalties were in line with TD Bank's expectations. The bank said it largely covered the fines using previous provisions of $3.05 billion. TD Bank first disclosed a U.S. Department of Justice probe into its AML program last year.

"We have taken full responsibility for the failures of our U.S. AML program and are making the investments, changes, and enhancements required to deliver on our commitments," said TD Bank chief Bharat Masrani in a statement. "This is a difficult chapter in our Bank's history. These failures took place on my watch as CEO and I apologize to all our stakeholders."

Shares of TD Bank fell 6% following the announcement.