We don’t yet know if a whistleblower — even more than one — helped provide evidence of the stunning AML failures at TD Bank, but attorneys Liz Soltan and Chris McLamb say regardless of how the investigation unfolded, compliance professionals can learn many lessons from it.
After TD Bank incurred a record-breaking $3 billion-plus fine for its money-laundering-related failures, bank compliance officers might be wondering, “Are we next?” The answer to that question may depend on another one: “Was there a whistleblower — or more than one — behind the TD Bank case?”
We may never know for sure, nor should we, given the need to protect whistleblower confidentiality. But based on some of the details disclosed in the plea agreement and consent order, it is reasonable to wonder whether one or more insiders may have helped build the government’s case.
Ignoring warning bells
First things first, let’s not shed a tear for TD Bank. The problems at TD Bank are not the kind a well-meaning compliance department could slide into. Instead, TD Bank ignored numerous warning signs and opportunities to steer clear of disaster, a common theme in whistleblower cases.
Warning One came from the government itself, over a decade ago. In 2013, the Financial Crimes Enforcement Network (FinCEN) and the Office of the Comptroller of Currency (OCC) fined TD Bank $38 million for similar failures when its monitoring systems did not catch $900 million of transactions related to a Ponzi scheme.
At the time, FinCEN found TD Bank had insufficient anti-money laundering (AML) training for its employees, and the OCC determined that the bank lacked systems to adapt AML monitoring to emerging conditions. Warning Two came five years later. In 2018, the OCC found that TD Bank had major AML problems, including delays in rolling out technology to respond to new threats. And those concerns were echoed in an internal audit that same year, which uncovered, among other problems, that TD Bank was using an outdated list of high-risk jurisdictions and did not have processes in place to update its monitoring scenarios.
Warning Three was really a set of warnings — findings in 2018, 2019 and 2021 from external consultants TD Bank hired. (One wonders why TD Bank hired consultants if it did not intend to listen to their reports.) For example, the 2018 consultant pointed out that it took TD Bank twice as long as the industry average to test and evaluate its transaction monitoring scenarios.
Warning Four was also a set of warnings, this time from its own employees. High-ranking executives in the AML office raised alarm bells about TD Bank’s outdated technology. AML employees tried to institute new processes and automate manual functions, but bank leadership claimed there was no money to make these changes. Retail employees raised red flags about a specific suspicious individual, who later pleaded guilty to money laundering. Some tellers were so uncomfortable, they told their managers they didn’t want to work with this individual. Instead of shutting the transactions down, AML employees told retail bank employees they didn’t need to keep filing multiple reports on the same shady customers.
We and our colleagues have represented hundreds of whistleblowers, including at major financial institutions. The vast majority of our clients — and whistleblowers generally — tried to fix problems internally before they ever considered blowing the whistle. Indeed, the SEC has reported that more than three-quarters of the insiders who receive SEC whistleblower awards first reported their concerns internally. But when senior management repeatedly fails to heed warning calls — as TD Bank did — employees often feel they have no choice but to go to the government.
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Read moreDetailsWidespread problems
One of the most breathtaking aspects of the TD Bank settlement is the sheer volume of compliance failures, even across seemingly disparate aspects of its AML program. The bank failed spectacularly in transaction monitoring, allowing 92% of its transactions to go unmonitored. This failure was driven in part by the bank’s “flat cost paradigm” — read my lips, no new compliance spending — even while its transaction volumes and revenues increased dramatically. The bank even rolled out a widely used new service, Zelle, without figuring out how to effectively monitor it.
There were also critical failures in employee training and customer due diligence. Front-line employees lacked expertise on red flags for money laundering at the bank counter, for example, and multiple bank employees actually conspired with money launderers, accepting gift cards and other bribes in exchange for servicing their accounts, depositing heaping bags of cash and not asking questions.
But just as bank employees can facilitate wrongdoing, they can help end it. Often, multifaceted settlements like this one can result when whistleblowers speak up in the middle of an existing investigation. This is particularly true at large institutions like TD Bank. For example, DOJ may already have been digging into the bank employees who took bribes from a suspicious money launderer when a whistleblower came forward with evidence of the bank’s massive transaction-monitoring gaps. Given the scope of the misconduct addressed in the government settlements, the real question may not be whether any whistleblower stepped forward here, but how many.
And let’s not forget the real-world consequences of TD’s failures: Three separate money-laundering operations treated the bank like their corner laundromat. One of them was a narco-trafficking conglomerate. Concerned employees are more likely to blow the whistle to the government when they realize that their employer’s misconduct is causing serious harm.
The launch of FinCEN’s whistleblower program
The government investigation into TD Bank also coincides with the creation and subsequent strengthening of the FinCEN whistleblower program, which offers awards and protections to whistleblowers who report violations of the Bank Secrecy Act and U.S. sanctions laws. FinCEN’s program was born in 2020 and expanded to cover sanctions violations in 2022. In its current form, the program awards eligible whistleblowers 10% to 30% of the amount the government collects based on their information. Here, that could mean hundreds of millions of dollars. And insiders have taken notice. FinCEN has reported receiving nearly 300 tips already under the budding program that have helped ferret out money laundering, Iranian and Russian sanctions evasion, drug trafficking and more.
Whether there was a whistleblower in the TD Bank case, it demonstrates the importance of having multiple ways for the government to uncover fraud. When a bank is determined to pursue profits and customer convenience even if it means facilitating money laundering, there need to be many levers for the government to pull to change the bank’s cost/benefit analysis. Knowing that any one of thousands of employees could alert the government to dangerously weak AML measures incentivizes banks to invest in compliance.
In TD Bank’s case, the comparatively paltry cost of better compliance technology and more rigorous controls is blotted out by the $3 billion-plus fine and the stain on its reputation. Even a bank can be penny-wise but pound-foolish; whistleblowers can help change that.
Liz Soltan 
Chris McLamb 
