(Toronto) TD Bank Group could be hit with tougher sanctions than expected, says banking analyst after publication of report indicating that the investigation into the financial institution in the United States is linked to money laundering illicit profits from fentanyl.
National Bank analyst Gabriel Dechaine said in a note that the worst-case scenario among the multiple American investigations facing TD must be reassessed following the information reported Thursday by the Wall Street Journal.
The outlet said the US Justice Department’s investigation is focusing on how Chinese drug traffickers allegedly used TD to launder at least US$653 million and bribed TD employees to do so.
TD did not comment directly on the article, but it said its anti-money laundering defenses were deficient.
“Criminals are constantly looking to use banks to launder money. Unfortunately, our U.S. (anti-money laundering) program has failed to effectively thwart these activities. This is unacceptable, and we must and will do better,” spokesperson Elizabeth Goldenshtein responded in a statement.
The bank continues to cooperate with law enforcement and regulators, and a comprehensive effort is underway to strengthen its anti-money laundering program, she added.
According to Mr. Dechaine, the seriousness of the allegations means that TD could not only face fines far higher than the $500 million to $1 billion that many investors were anticipating, but also more severe restrictions imposed by regulators on its activities. commercial.
“We believe investors need to place more emphasis on worst-case scenarios for the stock,” he wrote in a note.
Cumulative fines could easily reach $2 billion, while regulators could put in place restrictions, including limits on balance sheet growth, that could affect banking operations for years, Dechaine said.
In a worst-case scenario, the problem could erode TD’s future earnings potential by more than $1 billion, he said. He lowered his price target for the bank’s TSX-listed shares by almost 9%, to $84.
The drug trafficking news comes the same week TD announced it had taken an initial $450 million standstill as part of the ongoing U.S. regulatory investigation into its anti-money laundering compliance program. silver.
The bank said Tuesday that its discussions with three U.S. regulators and the Justice Department were ongoing and that it anticipated additional financial sanctions.
In addition, the Financial Transactions and Reports Analysis Center of Canada imposed a fine of 9.2 million on the bank on Thursday for non-compliance with measures against money laundering and terrorist financing.
TD Bank’s stock price fell nearly 6% to $74.80 Friday on the Toronto Stock Exchange.