News

Two branch employees of TD Bank already face trial for their alleged roles in a criminal scheme that played a part in the assessment of a record $3 billion in U.S. penalties against the lender this month and its unprecedented plea of guilty to conspiring to launder money.

But their cases and TD Bank’s landmark settlement with U.S. regulators and the Justice Department, which began with street-level surveillance of cash couriers driving between various bank branches in New York three years ago, do anything but draw a line under a sprawling scandal that prosecutors outlined in a 47-page indictment against the Toronto, Ontario-headquartered lender.

“Criminal investigations into individual employees at every level of TD Bank are active and ongoing,” U.S. Attorney General Merrick Garland said at a press conference in Washington, D.C., on Oct. 11 as the Justice Department published the terms of the settlement. “No one involved in TD Bank’s illegal conduct will be off limits.”

The conspiracy at TD Bank had three components: a willful failure to address systemic anti-money laundering deficiencies and screen trillions of dollars of transactions from 2014 to 2023; evasion of currency-transaction-reporting requirements on $400 million of payments from 2019 to 2021; and laundering of $671 million via three separate schemes from 2019 to 2023.

Prosecutors have already filed charges against Gerardo Aquino, a former customer liaison at the bank’s branch in Hollywood, Florida, and Oscar Nunez, a former sales leader in Scotch Plains, New Jersey, for allegedly assisting one of the schemes, and newly revealed in their indictment of TD Bank that they suspect three other branch-level employees of involvement.

Their public disclosure of new suspects hints at more indictments around the corner, at least at the branch-level. But it is the broader, ongoing investigation into employees “at every level” of TD Bank that will answer the larger question of how high the rot climbed, and whether individuals in senior-level positions stand trial.

Attempting to hold managers or executives at TD Bank criminally responsible for the first element of the conspiracy, the lender’s “willful,” near decade-long anti-money laundering program-related failures, would mark a sea change in U.S. enforcement of AML requirements and the Bank Secrecy Act.

Anne Marie McAvoy, a former federal prosecutor in the Eastern District of New York, told ACAMS moneylaundering.com that the Justice Department’s historical lean towards corporate over individual liability stems from the higher burden of proof associated with the latter.

Generally speaking, prosecutors establish corporate criminal liability by showing that a particular company acquired “collective knowledge” of a violation through the combined, limited knowledge of individual employees who, on their own, may have only a partial view of the misconduct in question.

Proving that a board member, for example, knew fully and clearly that withholding resources from an institution’s compliance department would invariably result in illicit finance poses an altogether different challenge, said Les Joseph, former principal deputy chief of the Justice Department’s Asset Forfeiture and Money Laundering Section.

“That’s far less likely,” Joseph, now an independent AML consultant in Maryland, told moneylaundering.com.

‘You guys really need to shut this down LOL’

Still, the indictment against TD Bank does not mince words.

“At various times, high-level executives, including those in global AML operations, in senior executive management and on the TDBUSH [TD Bank U.S. Holding Company] auditing committee knew there were long-term, pervasive and systemic deficiencies,” prosecutors allege therein.

The bank’s chief AML officer and chief BSA officer, or “Individual 1″ and Individual 2” in the indictment, knew of the deficiencies but continued to “tout their abilities to operate within the flat cost paradigm” the bank enforced.

AML management’s near-perpetual prioritization of savings over compliance did not go unnoticed by lower-level employees.

In October 2021, an AML technologist asked a global AML manager to speculate as to what “the bad guys” think of TD Bank, to which the manager responded, “lol, easy target … old scenarios; old [customer risk rating]; tech agility is poor to react.”

From 2019 to 2021, Da Ying Sze, or “David,” as employees of TD Bank knew him, exploited those vulnerabilities to launder $474 million into and through corporate accounts at the lender’s branches in New Jersey, New York, Pennsylvania, Maine, and Florida.

Sze pleaded guilty in February 2022 to laundering a combined $653 million in unlicensed money-transmission proceeds “through numerous financial institutions,” but, according to the indictment, viewed TD Bank as having “by far the most permissive policies and procedures.”

Prosecutors allege that retail employees “at multiple levels” of TD Bank understood and acknowledged the probable illegality of Sze’s transactions, which included millions of dollars’ worth of deposits in single days; rapid, outbound transfers of those funds via bank checks and wires; transactions initiated by unauthorized third parties; and improper use of personal accounts.

In August 2020, one branch manager referred to the increasingly apparent money-laundering scheme in telling another branch manager in an email that “you guys really need to shut this down LOL.” Later that year, another branch manager warned several regional managers that his tellers “are at the point that they no longer feel comfortable handling these transactions.”

“How is that not money laundering?” a branch-level employee asked after Sze’s network bought more than $1 million in cashier’s checks in a single day in February 2021.

“Oh, it 100 percent is,” a back-office employee responded.

The indictment does not identify any other senior-level AML executives, either by name or job description, as responsible for the shortcomings that enabled illicit finance.

Nor does the Financial Crimes Enforcement Network, which separately attributed TD Bank’s regulatory infractions to “AML management” and the lender’s BSA officer, whom the bureau accused of not seeking more resources for compliance, failing to supervise high-risk operations and not taking accountability for “material gaps” that went unaddressed for several years.

“TD Bank’s approach to transaction monitoring was willfully deficient,” FinCEN alleged in a 99-page consent order published in coordination with the Justice Department, Federal Reserve and Office of the Comptroller of the Currency. “Frontline personnel were encouraged to stop reporting potentially suspicious activity.”

The bureau stopped short of holding other executives accountable.

“There is no evidence, until late in the relevant time period, that any of this was escalated to executive management or the boards,” FinCEN wrote.

Examples of AML regulatory actions and money laundering-related criminal charges against financial services employees prior to TD Bank abound, but U.S. prosecutors had yet to charge an entire institution with violating the BSA.

“We will follow the evidence wherever it goes,” said Garland.

Contact Chelsea Carrick at ccarrick@acams.org and Colby Adams at cadams@acams.org