TD Bank Learns the Hard Way: Anti-Money Laundering Law Is About More Than Terrorists

Consumer Finance   |   December 1, 2013
Share Page

In agreeing to pay a $37.5 million civil money penalty to the Financial Crimes Enforcement Network (FinCEN) and an additional $15 million penalty to the SEC this past September, TD Bank N.A. unwittingly provided an expensive lesson to the financial services industry: the Bank Secrecy Act, often called the "anti-money laundering (AML) law," is not just about stopping terrorism.

According to statements by the SEC, FinCEN’s newly-created Enforcement Division, and the Office of Comptroller of the Currency (which partnered with FinCEN on the $37.5 million penalty), Scott Rothstein, chairman of the Fort Lauderdale, Florida-based law firm, Rothstein Rosenfeldt Adler, operated a Ponzi scheme worth nearly $1 billion from April, 2008 through September, 2009 while banking with TD Bank. The scheme involved convincing individuals to invest in purported confidential structured settlements that were available for purchase; upon doing so Rothstein would forge judges’ signatures on fake settlements.

Under the Bank Secrecy Act, banks are obligated to report transactions that involve or aggregate to at least $5,000, are conducted by, at, or through the bank, and that the bank "knows, suspects, or has reason to suspect" are suspicious. According to FinCEN, the bank "failed to properly identify, monitor, and report suspicious activity" in Rothstein’s Interest on Trust Accounts (IOTAs) at the bank; many transactions therein were part of Rothstein’s Ponzi scheme. Rothstein used these TD Bank IOTAs to project safety and legitimacy to potential investor victims.

Although the bank’s AML surveillance software allegedly issued alerts at that time concerning activity in Rothstein’s accounts, the bank did not file any Suspicious Activity Reports (SARs) until 2011, after an internal review uncovered approximately $900 million in aggregate suspicious activity in Rothstein’s accounts – and after Rothstein had plead guilty to RICO charges in June, 2010.

While the SEC separately alleged fraudulent facilitating activity by the bank’s regional vice president, FinCEN, in its Assessment, focused squarely on the bank’s delay in filing SARs, blaming it largely on "[a] lack of adequate training for both the business and Bank Secrecy Act/Anti-Money Laundering staff."

©2020 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Subscribe to Publications


The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.