A convenient place to launder money. Rapid expansion made t D Bank a household name in the U S, but left it vulnerable to criminals and billions in fines. By Christine Dabby, ari Alstetter, David Voriakos, and Tom Schoenberg read aloud by Mark Leedorf. On an overcast spring day in twenty twenty one, dying David Z walked out of a four story concrete warehouse in Queens, New York, carrying several bags full of money. Z, a father of two in his forties and the owner of a garment company operating out of the warehouse, placed the bags in Alexis s u V, then drove with two associates to a bank, where they made several large cash deposits. Unbeknownst to Z, he was being watched the whole time. Federal agents had been surveiling him for months. They suspected him of leading a gang of money launderers whose clients included Chinese Fenton dealers. The agents had watched C and his associates pick up bags of cash at the warehouse and Z's home, then drive to bank branches throughout New York, New Jersey, and Pennsylvania. There they'd make deposits and often immediately use the money to purchase bank checks, According to court documents and people familiar with the investigation, by the time law enforcement stepped in to arrest Z and five members of his crew weeks later in May twenty twenty one, they'd sneaked more than half a billion dollars of illicit cash into the financial system. Most of that business had been conducted at one institution, TD Bank. When investigators looked closer at the bank, they realized c wasn't the only criminal who'd made TD their depository of choice. There was the group from Manhattan's Diamond District using bogus gold sales to launder money, the Colombian drug traffickers using TD debit cards to bring their US profits back home, and the human trafficking ring that claimed to be an HVAC company when it opened an account. The more investigators looked at TD, the more money laundering they found. These surely weren't the kind of clients TD Bank Group was looking for when it acquired New Jersey based Commerce Bank Corp. In two thousand and eight and adopted its tagline America's Most Convenient Bank. Known as Toronto Dominion in Canada, where it's one of the country's big five banks. TD was expanding furiously in the US, buying up more than half a dozen retail institutions in less than a decade. It was a bet on the competitive advantages of having branches everywhere, long hours of operation, and easy account sign ups, and it seemed to work. TD went from being almost nonexistent in the US at the turn of the century to the country's tenth largest bank today, but the size and pace of its acquisition spree left it a favorite of America's underworld two last year, TD's American subsidiary became the first U. S bank ever to plead guilty to conspiracy to commit money laundering. The company agreed to pay three point one billion dollars in fines to various parts of the federal government, a sum that included the biggest penalty ever levied by the Department of Justice under the Bank Secrecy Act, the main U S anti money laundering law. More than two dozen people, including three bank employees, have already been charged. Prosecutors will be busy with investigations arising out of the TD case for years to come. According to a person familiar with the matter. This account of how TD made itself vulnerable to criminals is drawn from dozens of documents filed in U S court cases so far, including the consent order it agreed in order to resolve an investigation by the Financial Crimes Enforcement Network or FENSEN, and the statement of facts it confirmed with the Justice Department as part of its guilty plea. Bloomberg BusinessWeek also spoke with investigators and bank insiders, who were all granted anonymity to discuss confidential information. TD said in a statement it has taken full responsibility for the failures of its anti money laundering program and is making significant investments and enhancements to meet the terms of the resolution and help protect the financial system, adding this is our most important priority. The bank didn't respond to questions about most of the details in this article. A lawyer for SEA, who's awaiting sentencing after he pleaded guilty to various money laundering offenses in February twenty twenty two, declined to comment. For TD, the story is one of breathtaking corporate hubris, of breakneck expansion followed by budget cutting that left its branches open to exploitation by organized crime for the rest of the industry. It's a cautionary tale that could have a lasting impact on American banking. In messages investigators uncovered between two TD employees, one asked, why do all the really awful ones bank here? Because the other responded, we are convenient. The Chinese born Sea had already been operating in the queen's garment industry when he added a new business line, laundering money for drug dealers. It's unclear how he was first introduced to them, or whether he knew the source of the money he received, but the dealers needed a way to turn the proceeds from their illegal business into funds they could keep in a bank account and spend, and C's clothing operation, with its cash receipts and business accounts, afforded them an opportunity. Starting in early twenty sixteen, he gave it to them. A person familiar with his thinking says that at first he viewed it as just one more source of income. As C's reputation for getting money into the legitimate financial system grew, he gradually diversified his client base, according to someone familiar with the investigation against him, to fulfill the demand, he began recruiting people to be listed as the legal owners of shell companies with names such as Asia Sewing or Broadway Fashion USA, then had them open business accounts for those firms. He or the account holder would then deposit cash and immediately withdraw the money as either a bank check or wire transfer to get it back to the client. C's warehouse and Queen's became one of the depots where the crew would come to collect bags of cash for deposit. He charged clients a commission of one percent to two percent of the cash laundered. In twenty twenty two, C's illicit business began growing rapidly. The person familiar with the investigation says so much cash was coming in that the only way to launder it efficiently was through bigger transactions, even if these were likely to draw scrutiny. Through a process of trial and error, See found that TD was the place to do it. He began moving hundreds of thousands of dollars at a time, sometimes upwards of one million dollars in a single day. He later told investigators this was because TD had by far the most permissive policies and procedures of all the banks he'd tried, particularly when it came to filling out the paperwork they were legally obligated to send to the federal government. Whenever a customer conducts a transaction involving ten thousand dollars or more in cash, a bank must file what's called a currency transaction report with FENCEN, the federal agency responsible for preventing money laundering. These reports are compiled so law enforcement can identify people or businesses making regular, large cash deposits and perhaps give them a closer look to make it harder for money launders to evade detection by using alternate account holders, as C was doing. Bank staff are also required to report the name of the person actually conducting the transaction. However, the software TD used to generate its currency transaction reports automatically filled in the name of the account holder as the person conducting the transaction. Tellers could update the field with the correct information, but investigators found that in C's case, they'd failed to do so more than five hundred times. The investigators concluded that while much of this owe to poor training, SEE also occasionally bribed TD tellers with gift cards to keep the operation running smoothly, sometimes twenty five dollars for Starbucks or Whole Foods, According to a person familiar with the matter, one time, Sea appeared on the bank's security footage stout in a green sweater and black puffer vest, piling stacks of cash at the teller counter for deposit into an account whose ostensible owner was nowhere in sight. Another time, he provided only a photograph of the account holder's identification on his phone when making a deposit, and yet another time he was caught on camera at a midtown Manhattan branch counting out three hundred and seventy two thousand dollars in cash while the account's nominal owner reclined in an armchair several feet away. C was rarely mentioned on the resulting currency transaction reports, and from twenty eighteen to early twenty twenty one, he was able to launder four hundred and seventy four million dollars through TD branches across five states while avoiding law enforcement. Frontline staff did raise alarms, as demonstrated by messages laid out in TD's statement of facts with the Justice Department, watching people with C's organization purchase more than one million dollars in bank checks on a single day in twenty twenty one, one branch employee asked in an internal message, how is that not money laundering, to which a back office colleague responded, oh, it one hundred percent is. In an email exchange between two branch managers about the c organization's activities, one commented, you guys really need to shut this down lol. On a separate occasion, a different branch manager told his supervisors it is getting out of hand and said his tellers didn't feel comfortable handling CES transactions. Some of these suspicions reached senior TD executives, but curbing money laundering is expensive, especially when you've already spent more than twenty billion dollars to expand in the US. We'll be right back with a convenient place to launder money. Welcome back to a convenient place to launder money. The Justice Department ultimately determined that one of the executives who'd failed to stop SEE had been one of its own. Before joining TD in twenty fourteen, Mia Levine had spent more than a decade policing America's banks at the DOJ. A two lane university educated lawyer, she prosecuted money laundering cases and helped supervise the unit investigating them. Her experience included oversight at one prosecution that led Union Bank of California to admit it had failed to report transactions linked to cocaine trafficking. Levin also helped run the federal government's Troubled Asset relief program following the two thousand and eight nine financial crisis, working to prevent the banking system from collapsing. So in twenty fourteen, when TD hired her to run the internal team responsible for reporting potential money laundering to US authorities, her credentials were unimpeachable, but the team she took over was understaffed and buried under a massive backlog, leading them to prioritize speed over thoroughness. According to a person who worked there at the time, TD was also under some financial pressure. While its expansion had firmly established the brand in a faster growing market, the American business was much less profitable than its Canadian counterpart. The same year Levigne was hired, Barrett Masrani, who'd overseen the US operation, became chief executive officer of the parent company in Toronto. His priority quickly became slashing expenses to boost the share price. By the end of twenty fifteen, executives were saying the cost cutting program would eventually save annually as much as six hundred million Canadian dollars about four hundred and forty nine million US dollars at the time. Former TD employees say efforts to thwart money laundering were also viewed through that lens. So although Masrani had himself once been the bank's chief risk officer, initiatives to improve screening of high risk customers were put on hold. Gaps in the transaction monitoring system were left unaddressed, and requests for more staffing went unfulfilled. His spending controls were known inside TD as the flat cost paradigm. Masrani didn't respond to questions posed to him through the bank. By May twenty nineteen, Lavine had been promoted to Bank Secrecy Act Officer, the senior executive in charge of insuring TD complied with US anti money laundering rules. Just two months into her new post, she received a report from her team showing that a new money laundering tactic, the Colombian typology, was almost certainly going on at TD. The method involved depositing drug money into US bank accounts then withdrawing it in dozens of ATM transactions in Colombia. Withdrawals from TED accounts at cash machines in Colombia increased roughly fifty percent each year over a four year period, despite the bank not having a single branch in the country, According to ted's statement of facts with the Justice Department, Levigne and other senior executives received a presentation about the Colombian typology that September, and she and her team discussed branch level changes to stop it. Some of them noted that other banks had already made similar changes, which had likely pushed the criminals to try TD instead. The proposed reforms were abandoned, though the potential impact on customer experience, as well as the increased staffing the measures would require, was ultimately deemed too great, but court filings don't say who made the call to kill the reforms. Levin is identified only as Individual two or as TD's Bank Secrecy Act Officer in the filings. Her identity was confirmed to BusinessWeek by multiple people who worked the bank at the time. She hasn't been charged with anything, and her lawyer didn't respond to requests for comment about references to her actions in the filings. Whoever made the decision to ignore the Colombian typology, it seems to have set a precedent for TD's approach to see. The next year, legal filings say Levin began receiving reports highlighting various New York based clothing companies depositing huge amounts of cash and withdrawing it with bank checks. The extraordinary volume and value of this activity was enough to make it stand out, as was the fact that it had come during the COVID nineteen pandemic, when the use of cash at most businesses had declined dramatically, the legal documents say, but Leavin didn't review the reports in detail. Her only comment on them included a request that they be generated less frequently. In the end, it was the fencenn currency reports see worked so hard to falsify that proved his undoing. Although he'd been largely successful at insuring the reports obscured his involvement, they still had to state what business the company depositing the cash was ostensibly engaged in his shell companies were listed as operating in the garment industry, and half a billion dollars in cash running through the Queen's clothing trade seemed as suspicious to the Internal Revenue Service and the Drug Enforcement Administration as it did to TD's internal analysts. By early twenty twenty one, the U. S. Attorney's Office in Newark, New Jersey, was involved an effort coordinated by Marco Peschet, a young prosecutor on his first big case. Federal agents began tailing the people whose names were listed on the accounts, but the investigators soon realized they were patsies. Mostly they just carried the bags of money or drove the vehicles. The person directing all the activity was ce May. Agents conducted a raid seizing three point six million dollars in cash from various properties in Queen's and the LEXISSUV from C. According to a forfeiture order filed in court by the following February, C had pleaded guilty to three counts operating a money laundering conspiracy, running an unlicensed money transmitting business, and bribing bank employees that left TD itself in the investigation's crosshairs. Agents had tallied upwards of fifty seven thousand dollars in gift cards handed out by C to its tellers as bribes, while nearly three quarters of the more than six hundred and fifty million dollars the C organization had laundered had moved through the bank. Investigators reached out to the Justice Department's Bank Integrity Unit, which plays a key role in determining whether to bring criminal charges against a financial institution. Prosecutors realized there were already two other massive cases that involved TD, widening the investigation even firms. One of these cases concerned a vast Puerto Rican drug trafficking ring that was employing the Columbian typology. Prosecutors in that case have so far charged at least three TD retail bankers, two from Florida and one from New Jersey, alleging they helped criminals open fraudulent accounts and issued dozens of debit cards to launder thirty nine million dollars in drug money. The three bankers haven't yet entered please and are in talks with prosecutors to resolve the cases against them. The second case involved a network of jewelry stores and precious metal wholesalers operating out of Manhattan's Diamond District. Prosecutors alleged that this group used bogus gold and jewelry sales to launder as much as six hundred and seventy three million dollars into the financial system, one hundred and twenty three million dollars of which went through TD. Although the group's activity bore several signs of money laundering, investigators found that, instead of inquiring further, TD staff had enrolled the wholesalers in an armored car service to ensure their cash reached the bank safely. The consent order between TD and fencen lists numerous other instances uncovered by investigators in which suspected criminals use TD. In one case, a supposed HVAC company bought hundreds of plane tickets to Turkey and Thailand, paid for immigration services in Surnam and Nicaragua, and made ATM withdrawals in Uzbekistan and Ecuador, all sides it was trafficking in people instead of air conditioners. In another case, an ostensible real estate company stipulated in opening its TD account that annual sales wouldn't exceed one million dollars, then proceeded to conduct more than one billion dollars in transactions, most of which involved funds flowing from a UK based cryptocurrency exchange to a Colombian financial institution. Then there were the TD customers engaged in transactions linked to human trafficking at massage parlors, the New York based religious organization that had ties to terrorist groups and was transacting in West Africa, And the computer manufacturer whose online customer reviews suggested it was actually selling illegal prescription drugs. TD had been fielding requests from federal investigators for about eight months when executives decided it was a good time to resume the company's US expansion. In February twenty twenty two, the bank announced it had agreed to spend thirteen point four billion dollars buying Memphis based First Horizon Bank, touting the deal as an opportunity to grow in the Southeast. But TD needed US regulators to sign off on the acquisition, and as the money laundering investigation grew, they made it clear they wouldn't allow it. In May twenty twenty three, TD called it off and paid a two hundred million dollar breakup fee. Things would only get more expensive from there. That summer, TD told shareholders it was facing inquiries from the Department of Justice about its money laundering controls. The following April it put aside four hundred and fifty million dollars for potential penalties. Then in August it provisioned an additional two point six billion dollars. A month later, the bank named a replacement for Masrani. Finally, in October, prosecutors announced TD's historic guilty plea with a total of three point one billion dollars paid to four agencies. Under pressure from law enforcement and regulators, the bank is now also spending about eight hundred and fifty million dollars over two years on improved compliance programs. Levigne has left t D along with more than twenty others, while the bank has hired seven hundred new anti money laundering specialists and forty new executives to oversee them. We continue to make important investments in technology, data, infrastructure, process, redesign and training. T D said in its statement to Business Week. The company has also overhauled its board, with five directors plus the chair all set to depart. T D slashed executive bonuses by thirty million Canadian dollars in twenty twenty four, and Masrani's pay plummeted by more than eleven million Canadian dollars. The anti money laundering challenges we face took place on my watch as CEO, and I take full responsibility, he said in a September statement. His successor, Raymond Chun, took over on February first of this year, two months earlier than planned. US authorities have also imposed an asset cap on TD's American retail operations, limiting their size indefinitely. This is among the most feared punishments in banking, and it could hobble the company for years to come. A similar asset cap at Wells Fargo has been a multi billion dollar drag on that bank's stock price and earnings since twenty eighteen. T D has estimated that to get under the asset cap, it will have to spend a further one point five billion dollars in one time after tax costs associated with selling some of its loan portfolios to other banks and repositioning its US investments. The prosecutions aren't done. More than two dozen defendants have been charged in Puerto Rico in connection with the Colombian drug case. On top of the three TD insiders facing charges, the Statement of facts the bank agreed to says, law enforcement has also identified two additional TD retail employees who helped with the Colombian money laundering. Prosecutions against the Manhattan Diamond District Ring are still unfolding as well. The repercussions are rippling across the finance industry. When HSBC Holdings admitted in twenty twelve that it had failed to maintain an effective anti money laundering program, leading Mexican and Colombian cartels to funnel drug money through the bank, it inaugurated a period of tighter oversight and increased compliance spending for many financial institutions. TD has set an even more significant precedent as the largest bank in US history to plead guilltlty to monitoring failures under the country's main money laundering law. It's also unique in having pleaded guilty at all. In most previous cases involving large banks, US authorities worked out deferred prosecution agreements, which involve admitting wrongdoing, paying fines, and agreeing to reforms that, once fulfilled see the charges dropped. Liz Boysen, a former federal prosecutor who's now a banking and compliance partner at Washington law firm Chapman and Cutler, calls the TD case a watershed moment, every bank in the US is combing through the filings that came out of TD's guilty Please, she says. If the result is more robust compliance programs across the industry, it could mean conveniences out of vogue at US banks for some time. For TD, the change could be that much harder. The most convenient tagline wasn't just marketing, says one person involved in the investigation. It was like a way of life for the bank.

A convenient place to launder money. Rapid expansion made t D Bank a household name in the U S, but left it vulnerable to criminals and billions in fines. By Christine Dabby, ari Alstetter, David Voriakos, and Tom Schoenberg read aloud by Mark Leedorf. On an overcast spring day in twenty twenty one, dying David Z walked out of a four story concrete warehouse in Queens, New York, carrying several bags full of money. Z, a father of two in his forties and the owner of a garment company operating out of the warehouse, placed the bags in Alexis s u V, then drove with two associates to a bank, where they made several large cash deposits. Unbeknownst to Z, he was being watched the whole time. Federal agents had been surveiling him for months. They suspected him of leading a gang of money launderers whose clients included Chinese Fenton dealers. The agents had watched C and his associates pick up bags of cash at the warehouse and Z's home, then drive to bank branches throughout New York, New Jersey, and Pennsylvania. There they'd make deposits and often immediately use the money to purchase bank checks, According to court documents and people familiar with the investigation, by the time law enforcement stepped in to arrest Z and five members of his crew weeks later in May twenty twenty one, they'd sneaked more than half a billion dollars of illicit cash into the financial system. Most of that business had been conducted at one institution, TD Bank. When investigators looked closer at the bank, they realized c wasn't the only criminal who'd made TD their depository of choice. There was the group from Manhattan's Diamond District using bogus gold sales to launder money, the Colombian drug traffickers using TD debit cards to bring their US profits back home, and the human trafficking ring that claimed to be an HVAC company when it opened an account. The more investigators looked at TD, the more money laundering they found. These surely weren't the kind of clients TD Bank Group was looking for when it acquired New Jersey based Commerce Bank Corp. In two thousand and eight and adopted its tagline America's Most Convenient Bank. Known as Toronto Dominion in Canada, where it's one of the country's big five banks. TD was expanding furiously in the US, buying up more than half a dozen retail institutions in less than a decade. It was a bet on the competitive advantages of having branches everywhere, long hours of operation, and easy account sign ups, and it seemed to work. TD went from being almost nonexistent in the US at the turn of the century to the country's tenth largest bank today, but the size and pace of its acquisition spree left it a favorite of America's underworld two last year, TD's American subsidiary became the first U. S bank ever to plead guilty to conspiracy to commit money laundering. The company agreed to pay three point one billion dollars in fines to various parts of the federal government, a sum that included the biggest penalty ever levied by the Department of Justice under the Bank Secrecy Act, the main U S anti money laundering law. More than two dozen people, including three bank employees, have already been charged. Prosecutors will be busy with investigations arising out of the TD case for years to come. According to a person familiar with the matter. This account of how TD made itself vulnerable to criminals is drawn from dozens of documents filed in U S court cases so far, including the consent order it agreed in order to resolve an investigation by the Financial Crimes Enforcement Network or FENSEN, and the statement of facts it confirmed with the Justice Department as part of its guilty plea. Bloomberg BusinessWeek also spoke with investigators and bank insiders, who were all granted anonymity to discuss confidential information. TD said in a statement it has taken full responsibility for the failures of its anti money laundering program and is making significant investments and enhancements to meet the terms of the resolution and help protect the financial system, adding this is our most important priority. The bank didn't respond to questions about most of the details in this article. A lawyer for SEA, who's awaiting sentencing after he pleaded guilty to various money laundering offenses in February twenty twenty two, declined to comment. For TD, the story is one of breathtaking corporate hubris, of breakneck expansion followed by budget cutting that left its branches open to exploitation by organized crime for the rest of the industry. It's a cautionary tale that could have a lasting impact on American banking. In messages investigators uncovered between two TD employees, one asked, why do all the really awful ones bank here? Because the other responded, we are convenient. The Chinese born Sea had already been operating in the queen's garment industry when he added a new business line, laundering money for drug dealers. It's unclear how he was first introduced to them, or whether he knew the source of the money he received, but the dealers needed a way to turn the proceeds from their illegal business into funds they could keep in a bank account and spend, and C's clothing operation, with its cash receipts and business accounts, afforded them an opportunity. Starting in early twenty sixteen, he gave it to them. A person familiar with his thinking says that at first he viewed it as just one more source of income. As C's reputation for getting money into the legitimate financial system grew, he gradually diversified his client base, according to someone familiar with the investigation against him, to fulfill the demand, he began recruiting people to be listed as the legal owners of shell companies with names such as Asia Sewing or Broadway Fashion USA, then had them open business accounts for those firms. He or the account holder would then deposit cash and immediately withdraw the money as either a bank check or wire transfer to get it back to the client. C's warehouse and Queen's became one of the depots where the crew would come to collect bags of cash for deposit. He charged clients a commission of one percent to two percent of the cash laundered. In twenty twenty two, C's illicit business began growing rapidly. The person familiar with the investigation says so much cash was coming in that the only way to launder it efficiently was through bigger transactions, even if these were likely to draw scrutiny. Through a process of trial and error, See found that TD was the place to do it. He began moving hundreds of thousands of dollars at a time, sometimes upwards of one million dollars in a single day. He later told investigators this was because TD had by far the most permissive policies and procedures of all the banks he'd tried, particularly when it came to filling out the paperwork they were legally obligated to send to the federal government. Whenever a customer conducts a transaction involving ten thousand dollars or more in cash, a bank must file what's called a currency transaction report with FENCEN, the federal agency responsible for preventing money laundering. These reports are compiled so law enforcement can identify people or businesses making regular, large cash deposits and perhaps give them a closer look to make it harder for money launders to evade detection by using alternate account holders, as C was doing. Bank staff are also required to report the name of the person actually conducting the transaction. However, the software TD used to generate its currency transaction reports automatically filled in the name of the account holder as the person conducting the transaction. Tellers could update the field with the correct information, but investigators found that in C's case, they'd failed to do so more than five hundred times. The investigators concluded that while much of this owe to poor training, SEE also occasionally bribed TD tellers with gift cards to keep the operation running smoothly, sometimes twenty five dollars for Starbucks or Whole Foods, According to a person familiar with the matter, one time, Sea appeared on the bank's security footage stout in a green sweater and black puffer vest, piling stacks of cash at the teller counter for deposit into an account whose ostensible owner was nowhere in sight. Another time, he provided only a photograph of the account holder's identification on his phone when making a deposit, and yet another time he was caught on camera at a midtown Manhattan branch counting out three hundred and seventy two thousand dollars in cash while the account's nominal owner reclined in an armchair several feet away. C was rarely mentioned on the resulting currency transaction reports, and from twenty eighteen to early twenty twenty one, he was able to launder four hundred and seventy four million dollars through TD branches across five states while avoiding law enforcement. Frontline staff did raise alarms, as demonstrated by messages laid out in TD's statement of facts with the Justice Department, watching people with C's organization purchase more than one million dollars in bank checks on a single day in twenty twenty one, one branch employee asked in an internal message, how is that not money laundering, to which a back office colleague responded, oh, it one hundred percent is. In an email exchange between two branch managers about the c organization's activities, one commented, you guys really need to shut this down lol. On a separate occasion, a different branch manager told his supervisors it is getting out of hand and said his tellers didn't feel comfortable handling CES transactions. Some of these suspicions reached senior TD executives, but curbing money laundering is expensive, especially when you've already spent more than twenty billion dollars to expand in the US. We'll be right back with a convenient place to launder money. Welcome back to a convenient place to launder money. The Justice Department ultimately determined that one of the executives who'd failed to stop SEE had been one of its own. Before joining TD in twenty fourteen, Mia Levine had spent more than a decade policing America's banks at the DOJ. A two lane university educated lawyer, she prosecuted money laundering cases and helped supervise the unit investigating them. Her experience included oversight at one prosecution that led Union Bank of California to admit it had failed to report transactions linked to cocaine trafficking. Levin also helped run the federal government's Troubled Asset relief program following the two thousand and eight nine financial crisis, working to prevent the banking system from collapsing. So in twenty fourteen, when TD hired her to run the internal team responsible for reporting potential money laundering to US authorities, her credentials were unimpeachable, but the team she took over was understaffed and buried under a massive backlog, leading them to prioritize speed over thoroughness. According to a person who worked there at the time, TD was also under some financial pressure. While its expansion had firmly established the brand in a faster growing market, the American business was much less profitable than its Canadian counterpart. The same year Levigne was hired, Barrett Masrani, who'd overseen the US operation, became chief executive officer of the parent company in Toronto. His priority quickly became slashing expenses to boost the share price. By the end of twenty fifteen, executives were saying the cost cutting program would eventually save annually as much as six hundred million Canadian dollars about four hundred and forty nine million US dollars at the time. Former TD employees say efforts to thwart money laundering were also viewed through that lens. So although Masrani had himself once been the bank's chief risk officer, initiatives to improve screening of high risk customers were put on hold. Gaps in the transaction monitoring system were left unaddressed, and requests for more staffing went unfulfilled. His spending controls were known inside TD as the flat cost paradigm. Masrani didn't respond to questions posed to him through the bank. By May twenty nineteen, Lavine had been promoted to Bank Secrecy Act Officer, the senior executive in charge of insuring TD complied with US anti money laundering rules. Just two months into her new post, she received a report from her team showing that a new money laundering tactic, the Colombian typology, was almost certainly going on at TD. The method involved depositing drug money into US bank accounts then withdrawing it in dozens of ATM transactions in Colombia. Withdrawals from TED accounts at cash machines in Colombia increased roughly fifty percent each year over a four year period, despite the bank not having a single branch in the country, According to ted's statement of facts with the Justice Department, Levigne and other senior executives received a presentation about the Colombian typology that September, and she and her team discussed branch level changes to stop it. Some of them noted that other banks had already made similar changes, which had likely pushed the criminals to try TD instead. The proposed reforms were abandoned, though the potential impact on customer experience, as well as the increased staffing the measures would require, was ultimately deemed too great, but court filings don't say who made the call to kill the reforms. Levin is identified only as Individual two or as TD's Bank Secrecy Act Officer in the filings. Her identity was confirmed to BusinessWeek by multiple people who worked the bank at the time. She hasn't been charged with anything, and her lawyer didn't respond to requests for comment about references to her actions in the filings. Whoever made the decision to ignore the Colombian typology, it seems to have set a precedent for TD's approach to see. The next year, legal filings say Levin began receiving reports highlighting various New York based clothing companies depositing huge amounts of cash and withdrawing it with bank checks. The extraordinary volume and value of this activity was enough to make it stand out, as was the fact that it had come during the COVID nineteen pandemic, when the use of cash at most businesses had declined dramatically, the legal documents say, but Leavin didn't review the reports in detail. Her only comment on them included a request that they be generated less frequently. In the end, it was the fencenn currency reports see worked so hard to falsify that proved his undoing. Although he'd been largely successful at insuring the reports obscured his involvement, they still had to state what business the company depositing the cash was ostensibly engaged in his shell companies were listed as operating in the garment industry, and half a billion dollars in cash running through the Queen's clothing trade seemed as suspicious to the Internal Revenue Service and the Drug Enforcement Administration as it did to TD's internal analysts. By early twenty twenty one, the U. S. Attorney's Office in Newark, New Jersey, was involved an effort coordinated by Marco Peschet, a young prosecutor on his first big case. Federal agents began tailing the people whose names were listed on the accounts, but the investigators soon realized they were patsies. Mostly they just carried the bags of money or drove the vehicles. The person directing all the activity was ce May. Agents conducted a raid seizing three point six million dollars in cash from various properties in Queen's and the LEXISSUV from C. According to a forfeiture order filed in court by the following February, C had pleaded guilty to three counts operating a money laundering conspiracy, running an unlicensed money transmitting business, and bribing bank employees that left TD itself in the investigation's crosshairs. Agents had tallied upwards of fifty seven thousand dollars in gift cards handed out by C to its tellers as bribes, while nearly three quarters of the more than six hundred and fifty million dollars the C organization had laundered had moved through the bank. Investigators reached out to the Justice Department's Bank Integrity Unit, which plays a key role in determining whether to bring criminal charges against a financial institution. Prosecutors realized there were already two other massive cases that involved TD, widening the investigation even firms. One of these cases concerned a vast Puerto Rican drug trafficking ring that was employing the Columbian typology. Prosecutors in that case have so far charged at least three TD retail bankers, two from Florida and one from New Jersey, alleging they helped criminals open fraudulent accounts and issued dozens of debit cards to launder thirty nine million dollars in drug money. The three bankers haven't yet entered please and are in talks with prosecutors to resolve the cases against them. The second case involved a network of jewelry stores and precious metal wholesalers operating out of Manhattan's Diamond District. Prosecutors alleged that this group used bogus gold and jewelry sales to launder as much as six hundred and seventy three million dollars into the financial system, one hundred and twenty three million dollars of which went through TD. Although the group's activity bore several signs of money laundering, investigators found that, instead of inquiring further, TD staff had enrolled the wholesalers in an armored car service to ensure their cash reached the bank safely. The consent order between TD and fencen lists numerous other instances uncovered by investigators in which suspected criminals use TD. In one case, a supposed HVAC company bought hundreds of plane tickets to Turkey and Thailand, paid for immigration services in Surnam and Nicaragua, and made ATM withdrawals in Uzbekistan and Ecuador, all sides it was trafficking in people instead of air conditioners. In another case, an ostensible real estate company stipulated in opening its TD account that annual sales wouldn't exceed one million dollars, then proceeded to conduct more than one billion dollars in transactions, most of which involved funds flowing from a UK based cryptocurrency exchange to a Colombian financial institution. Then there were the TD customers engaged in transactions linked to human trafficking at massage parlors, the New York based religious organization that had ties to terrorist groups and was transacting in West Africa, And the computer manufacturer whose online customer reviews suggested it was actually selling illegal prescription drugs. TD had been fielding requests from federal investigators for about eight months when executives decided it was a good time to resume the company's US expansion. In February twenty twenty two, the bank announced it had agreed to spend thirteen point four billion dollars buying Memphis based First Horizon Bank, touting the deal as an opportunity to grow in the Southeast. But TD needed US regulators to sign off on the acquisition, and as the money laundering investigation grew, they made it clear they wouldn't allow it. In May twenty twenty three, TD called it off and paid a two hundred million dollar breakup fee. Things would only get more expensive from there. That summer, TD told shareholders it was facing inquiries from the Department of Justice about its money laundering controls. The following April it put aside four hundred and fifty million dollars for potential penalties. Then in August it provisioned an additional two point six billion dollars. A month later, the bank named a replacement for Masrani. Finally, in October, prosecutors announced TD's historic guilty plea with a total of three point one billion dollars paid to four agencies. Under pressure from law enforcement and regulators, the bank is now also spending about eight hundred and fifty million dollars over two years on improved compliance programs. Levigne has left t D along with more than twenty others, while the bank has hired seven hundred new anti money laundering specialists and forty new executives to oversee them. We continue to make important investments in technology, data, infrastructure, process, redesign and training. T D said in its statement to Business Week. The company has also overhauled its board, with five directors plus the chair all set to depart. T D slashed executive bonuses by thirty million Canadian dollars in twenty twenty four, and Masrani's pay plummeted by more than eleven million Canadian dollars. The anti money laundering challenges we face took place on my watch as CEO, and I take full responsibility, he said in a September statement. His successor, Raymond Chun, took over on February first of this year, two months earlier than planned. US authorities have also imposed an asset cap on TD's American retail operations, limiting their size indefinitely. This is among the most feared punishments in banking, and it could hobble the company for years to come. A similar asset cap at Wells Fargo has been a multi billion dollar drag on that bank's stock price and earnings since twenty eighteen. T D has estimated that to get under the asset cap, it will have to spend a further one point five billion dollars in one time after tax costs associated with selling some of its loan portfolios to other banks and repositioning its US investments. The prosecutions aren't done. More than two dozen defendants have been charged in Puerto Rico in connection with the Colombian drug case. On top of the three TD insiders facing charges, the Statement of facts the bank agreed to says, law enforcement has also identified two additional TD retail employees who helped with the Colombian money laundering. Prosecutions against the Manhattan Diamond District Ring are still unfolding as well. The repercussions are rippling across the finance industry. When HSBC Holdings admitted in twenty twelve that it had failed to maintain an effective anti money laundering program, leading Mexican and Colombian cartels to funnel drug money through the bank, it inaugurated a period of tighter oversight and increased compliance spending for many financial institutions. TD has set an even more significant precedent as the largest bank in US history to plead guilltlty to monitoring failures under the country's main money laundering law. It's also unique in having pleaded guilty at all. In most previous cases involving large banks, US authorities worked out deferred prosecution agreements, which involve admitting wrongdoing, paying fines, and agreeing to reforms that, once fulfilled see the charges dropped. Liz Boysen, a former federal prosecutor who's now a banking and compliance partner at Washington law firm Chapman and Cutler, calls the TD case a watershed moment, every bank in the US is combing through the filings that came out of TD's guilty Please, she says. If the result is more robust compliance programs across the industry, it could mean conveniences out of vogue at US banks for some time. For TD, the change could be that much harder. The most convenient tagline wasn't just marketing, says one person involved in the investigation. It was like a way of life for the bank.