TD Bank falls 8% after it faces $3 billion fine and growth caps over charges of enabling fentanyl-linked money laundering scheme

• TD Bank shares fell 8% after it pleaded guilty to anti-money-laundering charges and agreed to pay a $3 billion fine.
• The charges involved a scheme by Chinese cartels bribing TD employees at bank branches in New York and New Jersey.

Shares of TD Bank dropped as much as 8% on Thursday after it pleaded guilty and agreed to pay a $3 billion fine stemming from charges over its anti-money-laundering practices.

The penalty is the largest ever anti-money-laundering fine imposed on a bank by US officials, eclipsing the nearly $2 billion fine HSBC paid in 2014 for transferring billions of dollars on behalf of Mexican drug cartels.

Canada-based TD Bank's US unit also accepted an asset limit set by the Office of the Comptroller of the Currency regarding how big its asset size can grow.

The bank cannot grow past its current $370 billion in asset size for as long as the asset cap is in place.

This is the first time an asset cap has been levied against a bank since 2018 when Wells Fargo accepted an asset limit due to its fake account-opening scandal.

"The OCC's coordinated and comprehensive action, including the imposition of an asset cap, will ensure that the bank focuses on building proper controls commensurate with its risk profile," acting Comptroller of the Currency Michael Hsu said.

The charges stem from an investigation that revealed TD Bank didn't have proper anti-money laundering practices in place.

The lack of controls enabled a money laundering scheme to take place by Chinese drug cartels that were linked to fentanyl sales.

The Chinese criminal operation involved bribing bank employees at TD branches in New York and New Jersey, allowing hundreds of millions of dollars in fentanyl sales to be laundered.

TD Bank's settlement includes the Department of Justice, FinCEN, the Federal Reserve, and the OCC.

In a statement in August, TD Bank CEO Bharat Masrani said, "We recognize the seriousness of our U.S. AML program deficiencies and the work required to meet our obligations and responsibilities is of paramount importance to me, our senior leaders, and our boards."

Masrani has since said he will retire from the company in April.

TD Bank stock has since pared its gains to about 6%, trading at $59.88 at 1:29 p.m. in New York.

TD did not immediately respond to a request for comment.