TD Bank has been handed a substantial $3 billion penalty over significant lapses in its anti-money laundering (AML) practices, raising concerns about its ties to two unidentified cryptocurrency firms operating in Colombia and the United Kingdom.
The settlement pertains to the bank’s U.S. operations and imposes restrictions on its future growth prospects, stemming from deficiencies in AML oversight. According to the Financial Crimes Enforcement Network (FinCEN), more than $1 billion of TD Bank’s transfer volume during the relevant timeframe was associated with a customer group designated as “Customer Group C.”
This group, which portrayed itself as engaged in sales finance and real estate, was primarily involved in facilitating cryptocurrency transactions. Notably, over 90% of its incoming funds were sourced from a UK-based cryptocurrency exchange, while more than 60% of its outgoing transactions were sent to a Colombian financial institution that specializes in virtual asset services.
FinCEN’s findings indicate that Customer Group C executed an average of $100 million in wire transfers monthly, predominantly involving third-party cryptocurrency trading in high-risk jurisdictions, including Colombia, China, and various countries in the Middle East. The sheer volume of these transactions raised alarms due to significant discrepancies from the customer’s onboarding documentation.
Increased Scrutiny of TD Bank’s Cryptocurrency Transactions
During the investigation period, TD Bank processed over $650 million in transfers for Customer Group C, which originated from an international cryptocurrency exchange. Despite the ambiguous sources of these funds, the bank continued to facilitate transactions, including over $420 million in wires to a Colombian financial institution providing cryptocurrency services.
Historically, TD Bank had previously entered the cryptocurrency market through its acquisition of TD Cowen, an independent investment bank that launched Cowen Digital in March 2022. This division was designed to offer institutional clients exposure to the crypto market, including access to assets such as Bitcoin and Ether. However, Cowen Digital was closed down in June 2023, a mere three months following TD Bank’s completion of its $1.3 billion acquisition of Cowen.
The shuttering of TD Cowen’s crypto division occurred against the backdrop of numerous high-profile cryptocurrency company collapses in 2022 and persistent banking and regulatory challenges faced by financial institutions in the U.S. throughout 2023.
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