Former employee of TD indicted in money laundering affair
TD Bank Faces Money Laundering Scandal and Its Aftermath
TD Bank, a major financial institution, has been embroiled in a significant money laundering scandal, with millions of dollars allegedly tied to the illicit drug fentanyl funneled through its branches. According to a Wall Street Journal report in May, the bank's anti-money laundering (AML) monitoring failed to detect over 90% of suspicious transactions from 2018 to 2024, leading to a record $3.09 billion fine and a series of operational, leadership, and financial changes.
The scandal came to light due to TD Bank’s AML deficiencies, which were initially probed by the Department of Justice (DOJ) in a 2021 criminal case involving Da Ying Sze, who coordinated a scheme to launder at least $653 million in proceeds from illegal fentanyl. The investigation revealed that TD failed to monitor $18.3 trillion in customer activity, allowing three laundering networks to transfer hundreds of millions of dollars through TD accounts.
One of the individuals implicated in the scandal is Leonardo Ayala, a former TD employee based in Florida. Ayala allegedly issued dozens of debit cards linked to accounts opened by another TD employee in the names of shell companies. He also allegedly received $2,900 from a Venezuelan national through a money-transfer app. Ayala faces a charge of conspiracy to commit money laundering and, if convicted, could face up to 20 years in prison and a fine of up to $500,000.
Gerardo Aquino Vargas, another former TD employee, allegedly provided a co-conspirator with at least 28 debit cards and claimed he charged them a lower rate than he charged others for the same illegal services, according to court documents from June.
In response to the scandal, TD Bank has taken several steps to address its AML deficiencies. The bank sold its 10.1% stake in Charles Schwab for about CAD 8 billion (~$5.6 billion) to strengthen its balance sheet amid the AML fallout and fund business investments and share repurchases. TD also acknowledged it will be challenging to grow earnings while addressing AML remediation and restructuring its U.S. balance sheet, though it remains committed to the U.S. market.
The scandal has also led to changes in executive leadership. Longtime CEO Bharat Masrani announced he would step down in April 2025, making way for the bank's then-head of Canadian personal banking, Raymond Chun, to take the top role. The bank appointed new executives specifically to financial crime prevention roles, such as Jacqueline Sanjuas as global head of financial crime risk management and Stephen Joyce as interim head for Canada and international operations.
The money laundering scandal has significantly affected TD Bank's operations, requiring regulatory oversight, massive reinvestment in compliance, and restructuring. The bank's U.S. retail business is under a $434 billion asset cap imposed by the Office of the Comptroller of the Currency.
The scandal also played a role in the collapse of TD's proposed acquisition of Memphis, Tennessee-based First Horizon, stunting the Canadian bank's strategy for growth in the southeastern U.S. The bank's recovery from the AML scandal is long and challenging, and ongoing enforcement actions in the U.S. complicate this path. While not explicitly stated, these operational and regulatory pressures likely weigh on TD's ability to pursue or complete large acquisitions smoothly in the short term.
In summary, TD Bank’s money laundering scandal has forced deep operational reforms, leadership changes, and financial restructuring that complicate its acquisition strategies and outlook for growth, especially in the U.S. The bank continues to address its AML deficiencies and work towards recovery.
1. The TD Bank scandal, classified under general-news and crime-and-justice, has triggered a series of changes in its business operations, including the sale of a significant stake to bolster its financial resources and the appointment of new executives focused on financial crime prevention.2. The money laundering scandal, involving millions of dollars potentially tied to illegal fentanyl, has not only impacted TD Bank's finance but also its image and reputation in the business community, possibly hindering its future acquisition ventures due to ongoing enforcement actions.
