The TD Terrace building in Toronto’s Financial District on March 4.Fred Lum/The Globe and Mail
In January, 2021, American law enforcement agencies surveilled a suspicious box truck and a Lexus SUV through the streets of Queens, N.Y. Their hunch was that a criminal ring was out to launder drug money.
Starting in a supermarket parking lot, a man and a woman got in the truck carrying three bags, then they drove to a bank parking lot where an Lexus SUV pulled up. Bags were exchanged between the vehicles, and the box truck left.
Shortly afterward, the woman, Yunqin Liu, took a bag from the SUV and walked into the bank, where she made a large cash deposit. Then she drove to another branch of the same bank and did it again. And then deposited even more at yet another branch.
Four months later, the U.S. authorities charged six people with money laundering, which resulted in the lead defendant, David Sze, pleading guilty. Throughout the proceedings, the authorities never named the Queens bank, merely referring to it as FI-1. But on Thursday The Globe and Mail reported that the financial institution is Toronto-Dominion Bank, and the revelation shed light on a years-long investigation that has haunted Canada’s second-largest lender.
“I regret that there were serious instances where the Bank’s AML program fell short and did not effectively monitor, detect, report or respond,” TD’s chief executive officer Bharat Masrani said in a statement Friday. “This is unacceptable and not in line with our values.”
Although TD is not the only financial institution tied to the money laundering operation, the sum of money involved is stunning. U.S. authorities believe the criminal ring conducted more than US$2-million worth of transactions on that single day in January, and that it laundered US$653-million between 2016 and 2021.
Last year TD disclosed that it was the subject of an anti-money-laundering (AML) investigation after U.S. regulators blocked its US$13.4-billion takeover of Memphis, Tenn.-based First Horizon Corp., but until Thursday investors and analysts never seemed all that fussed about the outcome. The working theory was that TD would pay a fine, but nothing obscene, and its expansion in the United States, its major growth market, would be limited for the near future.
That narrative is now changing – fast. “We believe that TD could not only face a larger than expected fine, but also regulator-imposed limitations on its business activities,” Gabriel Dechaine, a banking analyst at National Bank Financial, wrote in a note to clients.
For months, analysts have predicted a fine in the range of US$500-million to US$1-billion, but that’s now jumped. “We believe cumulative fines could easily hit $2-billion,” Mr. Dechaine wrote.
For months, investors and analysts have wondered if U.S. authorities were concerned about multiple AML breaches at TD over a long period of time, which might soften the financial blow, or if there was a new, major event that would result in much tougher enforcement. The revelation of TD’s involvement in a major money laundering operation that spanned three states – New York, New Jersey and Pennsylvania – suggests the latter.
As well, U.S. President Joe Biden has been escalating his administration’s crackdown on the laundering of illicit drug profits through the financial system, particularly when it comes to fentanyl.
TD, then, is in the centre of a geopolitical firestorm that spans China, which often supplies the chemicals for narcotics, Mexico, which manufactures the drugs and moves them into the U.S., and Russia, whose spies are reportedly deeply embedded in Mexican criminal groups.
Susan Gibson, the special agent in charge of the Drug Enforcement Administration’s New Jersey Division, said in a 2022 statement that the money laundered by Mr. Sze’s criminal ring allowed “drug traffickers to expand their operations throughout the U.S. and around the world.” She added that such laundering helps drug organizations flood U.S. streets “with deadly poison,” contributing to the high number of overdose fatalities.
Until this week, TD had said little about its AML deficiencies and about what it was doing to remedy the problem, but on Friday chief executive Bharat Masrani used more forceful language in a statement. Not only did he acknowledge serious issues, he added: “Criminals relentlessly target financial institutions to launder money and TD has a responsibility and an obligation to thwart their illegal activity.”
Before taking over as CEO in 2014, Mr. Masrani had been head of TD’s U.S. division, as well as chief risk officer of the entire bank.
On Friday, TD also disclosed that it has invested $500-million in upgrading its AML systems and has overhauled its AML team in Canada and the U.S., hiring hundreds of new AML professionals, “with deep expertise in program design, oversight, and execution.” The Globe reported in January that TD had hired Herb Mazariegos as its global AML head, and other hires include a head of high-risk U.S. investigations, a head of financial crime risk management and a global head of sanctions.
The new team is investing in enterprisewide AML training, as well as AML programs for new hires. The U.S. Financial Crimes Enforcement Network (FinCEN) has warned for years that drug traffickers are using sophisticated methods to launder their money, which makes it much harder to track – not just for banks, but for authorities, too.
Criminal rings now use “a wide range of innovative methods that avoid international wire transfers and pose particular obstacles for law enforcement,” Vanda Felbab-Brown, a senior fellow at the Brookings Institution in Washington, D.C., warned in a March U.S. Senate hearing.
Mr. Sze’s criminal ring used these laundering tactics to evade TD’s AML monitoring systems, and it also used bribes. When pleading guilty, he admitted to using various incentives to bribe bank tellers, including gift cards, which helps to explain why large cash deposits could be made.
In one instance, law enforcement found one of the ring’s members carrying multiple heavy bags up to the teller window at an unnamed financial institution, after which Mr. Sze approached and took numerous bundled stacks of U.S. currency out and placed them on the counter to be processed.
The criminal ring also relied on cashier’s cheques to launder the money through business accounts they managed for companies that include Queens Sewing 43 Inc. and Asia Sewing Corp.
Unlike personal cheques, which are sometimes held for a few days to verify details of the transaction, cashier’s cheques are guaranteed by the bank. That means the person who cashes them does not have to wait for the cheques to clear. Mr. Sze earned a fee of approximately 1 to 2 per cent of the cash laundered, according to the Justice Department.
While financial institutions played a prominent role in the criminal complaint against Mr. Sze, the Justice Department acknowledged that money waslaundered through various means, including at slot machines in casinos, where dirty money isconverted to tickets, and then the tickets are cashed out for new currency.
Although Mr. Sze pleaded guilty, he was granted bail on a US$500,000 surety bond. He has yet to be sentenced, but he surrendered his passport and his movement is restricted to New York and New Jersey.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
