TD Bank scandal shines light on 'snow washing

Canada's TD Bank is facing unprecedented scrutiny for its involvement in at least two money laundering investigations by the U.S. Department of Justice, one of which alleges TD was the main financial institution used by Chinese drug traffickers to launder $653 million (U.S.) in proceeds from fentanyl sales.

- ANA PEREIRA

TD Bank announced in April that it set aside $450 million (U.S.) related to U.S investigations of its antimoney laundering program and is expecting more "monetary penalties," which analysts estimate could amount to billions.

The scandal is shining a light on Canada's ongoing money laundering problem, dubbed "snow washing" to reflect the use of its pristine reputation and stable economy by criminals wanting to make suspicious transactions seem legitimate.

"Canada is the soft underbelly for western democracies. Our whole system is very tolerant of foreign threats, and it's becoming well known by not only threat actors, but our allies," said Calvin Chrustie, senior partner at the Critical Risk Team, a risk management and anti money laundering (AML) consulting firm. "I'm 100 per cent ... confident that Washington D.C., Canberra, Australia and London, England, as well as other western democratic capital cities are very well aware of Canada's underwhelming response to countering foreign threat activities, including illicit finance." Canadian banks don't have the same strict regulatory oversight when it comes to fraud and money laundering as those in the U.S.

It's what continues to make them the ideal target of transnational organized crime groups, AML consultants say.

The staggering difference between the two countries' potential fines against TD is evidenced by this: The bank has prepared to pay U.S. regulators nearly 50 times more than the administrative penalty levied by Fintrac, Canada's financial crime watchdog.