TD money-laundering, CFPB rule 1033: Top banking news October 2024

October 31, 2024 12:00 PM

Enjoy complimentary access to top ideas and insights — selected by our editors.

In October's roundup of top banking news, TD Bank Group faces an asset cap and $3 billion in money-laundering fines, the Consumer Financial Protection Bureau debuts its final rule on open banking, the failure of First National Bank of Lindsay, Oklahoma, and more.

Click here to read last month's roundup of banking news.

TD CEO Bharat Masrani and incoming CEO Raymond Chun shake hands during a conference.

TD CEO Bharat Masrani (left) and incoming CEO Raymond Chun (right).

TD to exit certain U.S. businesses after being hit with asset cap

Article by

Polo Rocha

and

Catherine Leffert

If TD Bank Group has its way, the handcuffs that bank regulators placed on its U.S. retail operations on Oct. 10 won't be a major drag on its overall business.

Overhauling its controls to prevent money laundering across its stateside operations will be costly. TD will also be shackled indefinitely by an asset cap that regulators have only ever used on Wells Fargo, which has been bound to stagnant asset growth for nearly seven years.

But TD executives say the Canadian banking giant can tap its unfettered Wall Street operations and businesses north of the border, even as its U.S. retail lines go through what they called "a transition year."

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Rohit Chopra, director of the Consumer Financial Protection Bureau.

Ting Shen/Bloomberg

CFPB's 1033 open banking final rule expands scope to payment apps

Article by

Kate Berry

The Consumer Financial Protection Bureau added payment apps and other financial products to its final open banking rule and in keeping with its focus on innovation, provided for some secondary uses of data.

The CFPB released the final rule on Oct. 22, but materials describing the final rule were made available to American Banker prior to its release.

The final rule hews closely to the CFPB's proposal from a year ago but appears to include some substantive changes to the rule's scope, secondary uses and the compliance period, which has been extended by 10 months for the largest banks. The open banking rule is referred to by the industry as "1033" for the section in the Dodd-Frank Act of 2010 that gave the CFPB authority to implement how consumers control their own financial data.

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Andrew Harrer/Bloomberg

TD money-laundering scandal puts supervision back under the microscope

Article by

Kyle Campbell

After using one of its most powerful enforcement tools to crack down on rampant money laundering at TD Bank, a Washington regulator finds its own oversight functions under the microscope.

The Office of the Comptroller of the Currency implemented an asset cap on TD, prohibiting the Toronto-based bank from growing its balance sheet until its money-laundering controls are fixed. And, for every year that the bank fails to address its issues, the agency can force it to shrink its holdings by up to 7%.

TD also faces more than $3 billion in fines, a litany of new requirements and a mandate to get regulatory signoff before making any significant business movements. Still, Pierre Buhler, managing director for financial services at the consulting firm SSA & Company, said the asset cap is the most impactful element of the enforcement package.

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A woman using Zelle on her smartphone. Over-the-shoulder picture.

Diego/AdobeStock

How Zelle fraud compares to other payment apps

Article by

Carter Pape

By some measures, Zelle is a less popular target for scammers and fraudsters than other peer-to-peer, or P2P, payment platforms in the United States, according to a variety of data sources. By others, it is a major offender — in line with its overall high usage.

Zelle has faced increasing pressure in recent months over fraud on the platform. Early Warning Services, a fintech co-owned by seven of the largest banks in the United States, operates the Zelle network, and some lawmakers say these big banks are not doing enough to protect their customers.

JPMorgan Chase, one of the owners of Early Warning, has said it would fight enforcement actions it might face over Zelle after the Consumer Financial Protection Bureau sent inquiries to the bank about fraud and scams on the platform. Early Warning has also said Zelle fraud and scams decreased from 2022 to 2023, even as transaction volume increased.

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Bloomberg

'It's a frenzy': JPMorgan Chase, Capital One dominate AI arms race

Article by

Penny Crosman

Over the past 12 months, the largest banks have been in an artificial intelligence arms race. An industry ranking reveals how they are fighting for the prize.

JPMorgan Chase, Capital One and Royal Bank of Canada have been named the top AI leaders in banking in Evident's AI Index for 2024. Three banks — Morgan Stanley, TD Financial Group and HSBC — made it into the top 10 for the first time. Wells Fargo, Citigroup, Commonwealth Bank in Australia and UBS round out the first 10 on the list.

Evident's team of data scientists annually assesses 50 of the largest banks in North America, Europe and Asia in the categories of AI talent, innovation, leadership and transparency, using mostly publicly available information.

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Office of the Comptroller of the Currency

Andrew Harrer/Bloomberg

First National Bank of Lindsay failure: One-off or sign of the times?

Article by

Ebrima Santos Sanneh

More than a year after a string of regional bank failures shook confidence in the industry, the abrupt failure of First National Bank of Lindsay, Oklahoma, on Oct. 18 is raising questions about whether the failure was due to idiosyncratic accounting errors at the bank or broader economic forces that could affect other institutions.

Industry veteran Brian Byrne, who is now an investment committee member at Assembler Growth Capital, said the numbers disclosed in the failure don't add up neatly as a one-off bank failure.

"I was on Wall Street all through the 2006 to 2008 period," Byrne said. "This is exactly how things get roiling."

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Rohit Chopra, director of the Consumer Financial Protection Bureau.

Al Drago/Bloomberg

CFPB's open banking rule: Four things to watch on 1033

Article by

Kate Berry

The Consumer Financial Protection Bureau's highly anticipated open banking rule is expected radically to reshape how consumers access their financial data. The final rule, which the CFPB released on Oct. 22, will impact the entire banking ecosystem from Wall Street to Main Street.

Open banking is the practice of safely sharing financial data held at a bank with another bank or third-party company. The CFPB's proposal would require banks to share data on checking accounts, prepaid cards, credit cards and digital wallets with the goal of fostering competition while protecting consumers' privacy.

Banks are concerned the rule will expose them to greater liability for potential for data breaches and fraud, and also require costly oversight of third-party fintech companies. Under a proposal the CFPB released a year ago, banks will have no ability to recoup costs. Bank trade groups have asked the CFPB to let them charge fees but CFPB Director Rohit Chopra is unlikely to do so given that he has sparked a storm with industry over so-called junk fees.

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Tada Images / Adobe Stoc

'Profits over compliance': TD takes record $3 billion guilty plea

Article by

Catherine Leffert

TD Bank Group became the first bank to plead guilty to money-laundering conspiracy on Oct. 10, marking a historic resolution to a yearslong compliance saga that is not only the most expensive case of its kind but will also prove to be a massive hamstring to the Canadian bank's stateside operations.

The Toronto-based bank pleaded guilty to criminal charges that it blundered its anti-money-laundering controls, allowing hundreds of millions of dirty dollars to be run through its channels. Attorney General Merrick Garland said at a press conference that by helping criminals, TD became one itself, creating an environment that allowed crime to flourish. "TD Bank chose profits over compliance with the law," he said.

TD agreed to pay $3.09 billion in fines, and its U.S. assets will be limited indefinitely at about $434 billion. The monetary penalties are roughly in line with what the company had been projecting for months, but there had been greater uncertainty about how much of a hit TD's potential U.S. growth would take.

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Al Drago/Bloomberg

Oklahoma bank fails amid claims of 'false and deceptive bank records'

Article by

Claire Williams

The First National Bank of Lindsay in Lindsay, Oklahoma, was shuttered by the Office of the Comptroller of the Currency and taken over by the Federal Deposit Insurance Corp. on Oct. 18.

First Bank & Trust Co. in Duncan, Oklahoma, assumed the First National Bank of Lindsay's insured deposits. The only office of the First National Bank of Lindsay resumed normal business hours as a branch of First Bank & Trust Co. on Oct. 21.

The OCC closed the bank "after identifying false and deceptive bank records and other information suggesting fraud that revealed depletion of the bank's capital," the agency said in a press release.

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U.S. Attorney General Merrick Garland

Ting Shen/Bloomberg

TD money-laundering scandal revives allegations of Too Big To Jail

Article by

Ebrima Santos Sanneh

One thing notably absent from Attorney General Merrick Garland's historic settlement announcement with TD Bank was any mention of criminal charges against executives who oversaw the bank during its involvement in a yearslong money-laundering conspiracy.

TD Bank, the ninth largest in the U.S. and second largest in Canada, became the first bank to plead guilty to money-laundering conspiracy, settling for $3.09 billion with U.S. authorities this month. The Department of Justice said the bank enabled hundreds of millions of illicit dollars tied to drug and human trafficking to pass through its system, leaving about $18 trillion in customer funds effectively unmonitored for more than six years.

"The fact that the bank was not only guilty of violating the BSAs — call them, preventative and reporting controls — but went a step further in violating the foundational, oldest money-laundering law on the books in the United States in actually conspiring, agreeing to launder money is really remarkable," said Scott Greytak, director of advocacy at Transparency International. "It's got to be one of the top three dirty money stories I've seen in the last five years or so … right up there with the Pandora papers and stories of Russian oligarchs being able to use gaps in our AML framework to move dirty money into the U.S."

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