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Bribery Probe Adds to TD Bank’s Legal Headaches

Toronto-Dominion (TD) Bank’s legal problems are growing with reported bribery allegations against a Florida banker.

That ex-employee, Gerry Aquino Vargas, is accused of taking multiple $200 bribes to help customers shift millions to Colombia by avoiding anti-money laundering protections, Bloomberg News reported Monday (June 3).

In a separate case, the report said, citing information from federal prosecutors, a former TD branch employee in New York admitted to defrauding a customer by bypassing the bank’s compliance measures.

These cases, Bloomberg said, are part of a larger investigation by the Department of Justice, U.S. Treasury and bank regulators into alleged money laundering and other financial crimes at the Canadian bank. 

“TD, like all financial institutions, works with law enforcement to identify, stop and support the prosecution of criminals,” a bank spokesperson said in a statement supplied to PYMNTS.

“When we became aware of these matters, we took action against these employees, coordinated efforts with the DOJ, and have supported their work to bring these criminals to justice. More broadly, where our program was ineffective, we have held those leaders accountable and are taking action to drive the changes and meet our obligations.”

The news comes on the heels of reports that TD had fired more than a dozen employees and begun overhauling its processes to deal with its AML failings. Some of those employees were charged with crimes, while others faced disciplinary measures for minor infringements.

The bank has set aside $450 million to resolve the inquiries in the U.S., and has also paid a fine in Canada for failing to file suspicious-activity reports and document risks related to money laundering and terrorist activity.

The penalties have impacted TD’s earnings, with CEO Bharat Masrani recently saying he was committed to resolving the investigations promptly. 

The bank has invested 500 million Canadian dollars (about $365 million) in its AML program, and says it has made tangible progress by introducing new technologies and honing its alert systems to tailor them to specific areas of operation and branches, PYMNTS wrote last month.

The Bloomberg report notes that the investigation could ultimately lead TD to pay a settlement of $2 billion, and could hamstring the bank’s plans to expand into the U.S.

The lender last year abandoned its plans to acquire First Horizon for $13.4 billion, with TD saying it could not see a path to regulatory approval. Bloomberg argues the cases have placed a spotlight on the bank’s leadership in Toronto. 

“Often it requires a management change for the regulators to feel confident that the issue’s really being taken seriously and the management’s not sort of trying to protect its past track record,” Evan Mancer, chief investment officer at Cardinal Capital Management, told Bloomberg.

He said his company recently sold its shares in TD after three decades of investing in the bank.