TD Bank takes initial provision of $450M related to U.S. anti-money laundering probe

Toronto-Dominion Bank (NYSE:TD) has taken an initial provision of $450M related to U.S. regulatory and law enforcement investigations of the lender’s anti-money laundering practices, and expects additional monetary penalties.

The Canadian bank said its anti-money laundering program was “insufficient to effectively monitor, detect, report, and respond to suspicious activity,” adding that work is ongoing to fix these deficiencies.

TD Bank (TD) is continuing discussions with three U.S. regulators and the Department of Justice. The $450M provision is related to discussions with only one of these regulators.

The provision does not reflect the final amount of potential monetary or non-monetary penalties, “which are unknown and not reliably estimable at this time,” the lender warned.

TD Bank (TD) affirmed that it has the liquidity and capacity to fund ongoing efforts to strengthen its anti-money laundering program.

Jefferies analyst John Aiken noted that while the provision is below initial expectations, this is not a definitive amount. “Further, an official order has not been issued by the regulators and the remediation clock has not started ticking, with other precedent transactions taking between three and ten years before orders were lifted. This announcement brings only limited clarity.”

The regulatory scrutiny began after TD Bank’s (TD) planned acquisition of First Horizon (FHN) was said to be terminated because of concerns over TD’s anti-money laundering practices.