(Bloomberg) - A US law-enforcement probe into Toronto-Dominion Bank’s internal controls is tied to the laundering of hundreds of millions of dollars in proceeds from illegal drug sales, the Wall Street Journal reported.
The US Department of Justice launched an investigation after discovering evidence of a drug-money-laundering operation in New York and New Jersey, the Journal said Thursday, citing court documents and people familiar with the matter. There are allegations that the criminals bribed Toronto-Dominion employees in that case and at least one other, the newspaper said.
Toronto-Dominion disclosed last year that it was under investigation by the department. Canada’s second-largest lender also faces probes by three US regulators over its handling of suspicious customer transactions. The bank has set aside an initial $450 million with respect to just one of those regulatory probes, it said earlier this week, noting that it can’t estimate the final size of any fines or other penalties it might face tied to the anti-money-laundering investigations.
Toronto-Dominion’s shares dropped after the Journal report Thursday afternoon, and closed down 1.7%.
“Criminals constantly seek to use banks to launder money. Regrettably, our US AML program did not effectively thwart these activities. This is unacceptable, and we must and we will do better,” Toronto-Dominion spokeswoman Lisa Hodgins said in an emailed statement to Bloomberg News. “As previously disclosed, we have been and continue to cooperate with law enforcement and our regulators. A comprehensive effort is underway to strengthen our AML program, including investments in talent, tools and technology.”
Bribery Allegations
The Journal cited a criminal case that included the laundering of at least $653 million in proceeds from drug sales. Da Ying Sze, a Queens, New York, man pleaded guilty in February 2022 to conspiring to commit money laundering and bribing a bank employee, among other charges.
“Sze routinely accepted illicit proceeds in cash and deposited the cash into financial institutions in New York, New Jersey, Pennsylvania and elsewhere, utilizing bank accounts in the names of shell companies and conspirators,” according to a statement at the time from the US Attorney’s Office for the District of New Jersey, which said that Sze received a fee of about 1% to 2% of the cash laundered.
The statement doesn’t name any specific bank. The Journal, citing people familiar with the matter, said that the investigation focused on the money launderers’ use of one particular bank, and it was Toronto-Dominion.
“From 2020 through 2021, Sze routinely provided gift cards and other things of value to employees of at least one financial institution in connection with financial transactions, seeking to corruptly influence financial institution employees to provide Sze with special benefits and to avoid suspicion and reporting of his unusual financial transactions,” the US Attorney’s Office said.
The office declined to comment on Thursday. Hodgins, the Toronto-Dominion spokeswoman, said she couldn’t answer specific questions about the bank’s involvement, if any, in that case.
The Journal also cited the previously reported case of Oscar Marcelo Nunez-Flores, a former Toronto-Dominion branch employee in New Jersey who was charged in October with accepting bribes to facilitate millions of dollars in money laundering tied to drug proceeds. That case remains in court.
An attorney for Nunez-Flores didn’t immediately respond to a request for comment Thursday.
Toronto-Dominion’s $13.4 billion deal to buy Memphis-based First Horizon Corp. was called off a year ago after it became clear that the Canadian bank couldn’t get timely regulatory approval for the deal.
Separately, the Financial Transactions and Reports Analysis Centre of Canada announced a C$9.2 million ($6.7 million) fine against Toronto-Dominion on Thursday. The penalty followed an investigation that found several administrative violations of Canada’s anti-money-laundering and terrorist-financing laws. That probe didn’t involve criminal allegations.
By Christine Dobby
