TD Bank, one of the largest financial institutions in the US, has come under intense crypto scrutiny after being hit with the largest penalty ever issued under the Bank Secrecy Act (BSA).
The $3.09 billion fine stems from alleged failures to report suspicious activities, including significant cryptocurrency-related transactions.
The US Department of Justice (DOJ) and the Financial Crimes Enforcement Network (FinCEN) revealed that TD Bank processed billions of dollars in questionable accounts, raising concerns about the bank’s compliance practices in dealing with digital assets.
What’s Really Wrong?
In the report, FinCEN stated that TD Bank failed to properly monitor the transactions of a specific customer called “Customer Group C.” The unnamed company, which claimed to operate in retail finance and real estate, allegedly misled TD Bank about the volume and nature of its international operations.
While Customer Group C initially reported that it would have transactions of less than $1 million annually, the company has processed more than $1 billion through TD Bank, most of which involve cryptocurrency. These differences, combined with links to high-risk areas, have drawn the attention of US authorities.
According to FinCEN’s findings, the banking giant made more than 2,000 Customer Group C transactions in just nine months. The company brought 90% of its funds from a UK-based crypto exchange and sent 60% to Colombian financial institutions involved in digital assets.
Group C’s Client Services have gone far beyond the scope of what they initially disclosed when they were on board with TD Bank, and are expanding their partnerships into high-risk areas such as China and the Middle East.
Despite these suspicious transactions and red flags related to risky locations and rapid fund movements, TD Bank reportedly failed to report these transactions immediately. After receiving many legal questions about Customer Group C, the bank started flagging this activity.
FinCEN noted that TD Bank has specific internal policies to monitor transactions involving digital assets, but these controls were not adequately applied in this case. As a result, millions of dollars in suspicious crypto transactions went unreported for months.
Punishment
As of last week Thursday (October 10), TD Bank pleaded guilty to violating the Bank Secrecy Act and money laundering laws. The bank agreed to pay a $1.8 billion fine as part of a settlement with the DOJ, and FinCEN imposed an additional $1.3 billion fine.
According to the report, the combined fine of $3.09 billion represents the largest fine ever issued under the BSA. As part of the agreement, TD Bank will also undergo four years of monitoring to ensure it uses better compliance practices in the future.
The featured image was created with DALL-E, a Chart from TradingView
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