What can organizations learn from the recent TD Bank anti-money laundering (AML) program settlement?
TD Bank recently appointed Guidepost Solutions as the compliance monitor for its anti-money laundering program as part of its $3 billion settlement with the US government. The settlement included a record $1.3 billion in penalties to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and $1.8 billion to the Department of Justice (DOJ). This penalty is one of the largest in history for AML violations and highlights significant shortcomings in the bank’s AML safeguards.
The appointment of Guidepost Solutions is part of a multi-year program to address these issues and strengthen TD Bank’s controls. The monitor will oversee TD’s operations in the U.S., track progress on risk and controls, and report to regulators. This move comes after TD Bank admitted to facilitating over $650 million in transactions for money laundering activities.
The bank has also seen significant leadership changes, with the departure of its CEO and global AML officer, as well as layoffs of several executives. This case underscores the importance of robust AML programs and the severe consequences of failing to detect and prevent money laundering activities.
Essential Safeguards to Prevent AML Violations in Your Organization
- Risk Assessment: Regularly assess the institution’s risk exposure to money laundering and terrorist financing. This involves identifying and evaluating potential risks based on the institution’s products, services, customers, and geographic locations.
- Internal Policies, Procedures, and Controls: Develop and implement comprehensive policies and procedures tailored to the institution’s risk profile. These should include guidelines for customer due diligence, transaction monitoring, and reporting suspicious activities.
- Transaction Monitoring and Reporting: Use advanced monitoring systems to detect unusual or suspicious transactions and help ensure timely reporting of suspicious activities to the relevant authorities. For example, TD Bank’s President and CEO Leo Salom shared in their Q1 earnings call that TD Bank will be implementing machine learning tools that will analyze customer data to more effectively and rapidly detect potential activity of interest later this year.
- Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD): Implement robust CDD procedures to verify the identity of customers and assess their risk levels. For higher-risk customers, apply EDD measures to gather additional information and monitor their activities more closely
- Independent Testing and Auditing: Conduct regular independent audits of the AML program to evaluate its effectiveness and compliance with regulatory requirements. This helps identify any weaknesses and areas for improvement.
- Employee Training: Provide ongoing training for employees at all levels to ensure they understand AML regulations, the institution’s policies, and their specific roles in preventing money laundering.
How Can Schneider Downs Help?
If you or your organization has need assistance in developing an AML/CFT program, contact our team at [email protected].
About Schneider Downs Financial Services
The Schneider Downs Financial Services industry group provides financial institutions of all sizes with the expertise to effectively address their needs in risk management, IT security and internal audit. Through cybersecurity, IT risk advisory, internal audit, IT compliance frameworks, risk advisory, risk management and more, our experienced professionals provide extensive and comprehensive solutions to our financial services industry clients.
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