I just rewatched Jaws. Richard Dreyfuss cuts the belly of that Tiger Shark open and, reaching in to his elbow, pulls out a license plate, a beer can, and bits of small tuna. I think today that TD might feel like that shark, with FinCEN, up to its elbow, pulling all the fetid emails, interviews, and internal reports from their hidden places. It stinks. It’s malfeasance, laziness, inattention, dishonesty, and perverse compensation incentives. 

For those of you just catching up, I’m talking about the recent U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) enforcement action against TD Bank. 

Here’s what FinCEN pulled from the recesses of TD:

1. “TD Bank willfully failed to establish an adequate AML program.” 

TD agreed to this statement as part of the Consent Order. Ouch. In TD Bank’s case, the lack of appropriate oversight allowed criminal activity like human trafficking, narcotics trafficking, and terrorist financing to thrive.

2. TD Failed to Dedicate Resources to BSA/AML

In fact, the Consent Order stated that TD consistently chose the least costly way out of problems, “even if it meant ignoring failures and refusing to meaningfully remediate issues and prevent recurrences.” That’s harsh. Stop a second to consider what that means - there’s some executive who, in writing, is on record saying, “let’s not do that, it’s too costly.” 

3. TD had Unqualified people, with bad a compensation plan

The Consent Order noted that TD had been “appointing multiple AML managers without any prior experience in AML.” And, painfully, it noted that under TD Bank’s compensation system, it was noted as an “accomplishment” that the BSA Officer didn’t ask for more money. Here’s the quote in corporate-speak: both the Global Head of AML and the BSA Officer’s annual self-assessments noted as an “accomplishment” their respective abilities to “develop [the AML] program within a flat cost paradigm.”

4. Millions of Bank Withdrawals from Countries they don’t do business in

The Consent Order states that TD Bank “maintains no physical presence in Latin America, yet during the Relevant Time Period, TD Bank customers conducted millions of ATM withdrawals in that region.” A sample review found $750 million taken out through ATMs in countries they don’t do business in!

The Consent Order states further, “TD Bank did not file SARs on over $125 million in cash used to purchase official bank checks by Sze and his network due to a gap in its monitoring controls.”

5. TD Failed to Timely File SARs Worth $500 million

Another key failure at TD Bank was its delayed or missing SARs and CTRs (Currency Transaction Reports). There were more than 70,000 backlogged detection alerts and roughly 3,000 aged subpoena responses.The Consent Order stated that TD failed to timely file more than 6,000 SARs with a value of over $500 million.

There’s more, of course. But at this point, it’s just gilding the lily.

Final Thoughts

When Dreyfuss cuts open that tiger shark, he’s hoping to find little Alex Kintner, the boy on the blow-up raft. I’m not sure what Andrea Gacki was hoping to find when she cut open TD, but what she gave us was a hard lesson in risk management. Read the Consent Order and decide what you must do to prudently protect your own company. And remember, sometimes you gotta close the beach.