After becoming the first lender in U.S. history to plead guilty to conspiracy to commit money laundering, TD Bank has hired several anti-money-laundering and compliance professionals and is exploring technology and restructuring the division to enhance its monitoring program.Andrew Lahodynskyj/The Canadian Press
Toronto-Dominion Bank anti-money-laundering chief Herbert Mazariegos is urging the financial sector to learn from his bank’s failures, cautioning the industry that criminals are targeting other institutions to wash illicit funds.
In his first public remarks since U.S. banking regulators and the Department of Justice unveiled the charges against TD Bank TD-T, Mr. Mazariegos told an audience of anti-money-laundering professionals that TD is working to remediate its compliance shortcomings.
In early October, Canada’s second-biggest bank became the first lender in U.S. history to plead guilty to conspiracy to commit money laundering after a decade of moving money for criminals and ignoring employees’ concerns. U.S. authorities levied a fine of more than US$3-billion and imposed rare penalties that limit the bank’s expansion ambitions in its largest growth market.
“The reality is, we’re not alone. I know we’re in the news today, but we’re not the last ones, unfortunately. There will be more,” Mr. Mazariegos said Thursday at a conference hosted by the Association of Certified Anti-Money Laundering Specialists (ACAMS) in Toronto. “I hope we’re all taking the opportunity to study what happened and just make our programs better, and at the end of the day, we’re all going to win. Look, we’re all in this together.”
TD hired Mr. Mazariegos from Bank of Montreal in November, 2023, to replace former chief anti-money-laundering officer (CAMLO) Michael Bowman. He is tasked with overseeing a costly overhaul of the bank’s anti-money-laundering program to meet sweeping requirements set by U.S. regulators, including establishing a compliance headquarters in the country.
TD has hired several new anti-money-laundering and compliance professionals and is exploring technology and restructuring the division to enhance its monitoring program, according to Mr. Mazariegos. He said that compliance should not be seen as an expense, but rather as a key business investment that saves on costs in the long run.
“When activity goes bad, particularly for a licensed salesperson, they take a hit,” Mr. Mazariegos said. “At the end of the day, their portfolio goes down. The revenue that they’re making, what they take is going to take a hit. So why put yourself in a situation where you might be penalized?”
While announcing the charges against TD on Oct. 10, U.S. Attorney-General Merrick Garland said that the bank put profits above compliance to reduce expenses.
“That decision is now costing the bank billions of dollars in criminal and civil penalties,” Mr. Garland said during the press conference.
Mr. Mazariegos made his comments during a panel discussion with his peers from other financial institutions, which focused on money laundering and other risks facing banks.
“It shouldn’t take an event like that to wake us up to trying to push the envelope a little bit more,” BMO CAMLO Adam Schabes said during the session, referencing the issues at TD. “The criminals are actively trying to pursue victims, and we need to actively try to pursue solutions.”
Safiya Adenekan, the chief compliance officer for Cash App and Afterpay Canada, said smaller companies can also learn from what happened at TD.
“Take a look at everything that was there and use it as your cheat sheet,” Ms. Adenekan said.
David Lee, Bank of Nova Scotia’s director of global AML and anti-terrorist financing policy development, said that the cultural approach to effective compliance processes needs to be set by a bank’s most senior leaders.
“We do annual training of our board,” Mr. Lee said during the panel. “We make our board very aware of the mistakes of others, so that it resonates with them.”
U.S. banking regulator the Office of the Comptroller of Currency included a requirement for TD to conduct a third-party assessment of its compliance and AML program.
More broadly, Canada’s banking regulator has introduced new measures to manage non-financial risks, including the culture and character of bank employees and oversight of the boards of directors.
Michael Donovan, Canadian Imperial Bank of Commerce’s CAMLO, said instilling a strong compliance culture can be tricky. “I think you definitely need the tone from the top, that’s your board, the executive level of the institution,” he said.
