Combating money laundering: Canada’s anti-money-laundering watchdog signs pact with U.S. regulators in wake of TD Bank scandal

Canada’s anti-money-laundering watchdog has signed a memorandum of understanding that allows it to share information with three U.S. regulators regarding Canadian banks with cross-border operations.

 

The agreement creates a framework for sharing supervisory information between the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) and three U.S. banking regulators: the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Federal Reserve.

 

Discussions between the regulators have been under way for years, but the need for a more formal information sharing agreement crystallized with recent issues at Toronto-Dominion Bank, according to one person familiar with the discussions. The Globe is not identifying the source because they are not authorized to speak publicly about the matter.

 

Earlier this year, Canada’s second-biggest bank became the first lender in U.S. history to plead guilty to conspiracy to commit money laundering after a decade of moving illicit funds for criminals.

TD is facing more than US$3-billion in fines, as well as a host of non-monetary penalties, from U.S. banking regulators and the Department of Justice over gaps in the bank’s anti-money-laundering controls.

 

Canadian banks and government agencies are under heightened pressure to crack down on increasingly sophisticated global criminal organizations as Canada’s framework for combatting financial crime comes up for review.

 

The Financial Action Task Force, an intergovernmental body that sets standards for tackling money laundering and terrorist financing, will begin evaluating the effectiveness of Canada’s anti-financial-crime regime early next year.

 

FinTRAC has levied its largest-ever fines against major Canadian banks over the past year and the federal government has introduced new legislation.

 

The MOU announced Wednesday pertains to the sharing of what’s known as supervisory information. FinTRAC has a supervisory branch that conducts various activities, including examinations to ensure that companies are meeting their legal obligations, such as adequately reporting suspicious transactions.

 

That work is separate from FinTRAC’s intelligence efforts, which involve analyzing information it receives from businesses relating to financial crime and disclosing the information to law enforcement and national security agencies. FinTRAC already has the capacity to share that information with foreign financial intelligence units, including the Financial Crimes Enforcement Network in the United States, through the Egmont Group.

 

The Ottawa-based international organization is comprised of 177 financial intelligence units around the globe and serves as a platform for sharing financial information internationally in the fight against money laundering and terrorist financing.

 

“The co-operation and communication between the authorities will allow for each agency to effectively respond to emerging risks and enhance risk identification, prevention and detection, in an effort to mitigate money laundering/terrorist financing risk exposure,” FinTRAC said in a post on the social media website X.

 

In addition to setting monetary policy, the Fed’s duties include supervising and regulating banks. A Fed spokesperson confirmed that it has signed the MOU.

 

Chris Mathers, president of consulting and investigative firm Chris Mathers Inc., called the agreement “long overdue.” Without information sharing between Canada and the U.S., criminals have been able to operate with impunity, Mr. Mathers said in an e-mail.

 

“I think that this is just the beginning. When the new U.S. administration threatens tariffs if Canada doesn’t step up the fight against fentanyl, they aren’t just talking about policing the border,” Mr. Mathers said.

“Strict anti-money-laundering compliance is a key component of the U.S. anti-drug strategy, and the Canadian government needs to demonstrate that we are willing to partner with them. Information sharing between agencies is essential if we are going to even have a chance to stem the flow of fentanyl, in either direction,” he added.

 

TD’s money-laundering issues first surfaced more than a year ago, when the lender announced it was walking away from a US$13.4-billion deal to buy Tennessee-based First Horizon Corp. The Wall Street Journal later reported that money-laundering concerns were behind regulators’ reluctance to permit the deal to move ahead.

 

In October, the U.S. Department of Justice laid out in detail how TD, the 10th-largest lender in the U.S., became mired in money laundering by criminal organizations and drug cartels.

 

TD allowed three money-laundering networks to move more than US$670-million through its bank accounts, with at least one of those schemes involving the bank’s employees.

 

 

 

 

This article was first reported by The Globe and Mail