TD’s U.S. Money-Laundering Fine Sparks Fresh Scrutiny of Canada’s Enforcement Gaps

Canada’s approach to combating money laundering is under renewed scrutiny after TD Bank Group agreed to pay more than US$3 billion to U.S. regulators over failures in overseeing money-laundering risks a penalty that far exceeds anything Canadian authorities can currently impose.

Experts say the case highlights a long-standing problem: enforcement tools in Canada are too weak to deter large financial institutions and risk becoming little more than a cost of doing business.

Denis Meunier, president of DMeunier Consulting Inc. and a former deputy director at FINTRAC, said Canada urgently needs tougher penalties. Administrative monetary penalties have not increased since 2008, he noted, and do not reflect the scale of today’s financial crimes.

“It’s time we take off the kid gloves,” Meunier said. “You need penalties that actually punish and send a message. These fines should be in the millions and potentially billions of dollars.”

Under current rules, FINTRAC can impose a maximum fine of $500,000 for each very serious reporting violation, or it can refer cases for potential criminal prosecution. By contrast, U.S. regulators are allowed to fine banks up to US$500,000 for every day an effective anti–money laundering program is not in place a framework that helped drive the massive U.S. settlement with TD.

Because of these limits, the $9.2 million penalty FINTRAC levied against TD earlier this year was the largest in the agency’s history.

Beyond fines, Meunier argues regulators also need more resources and better retention of skilled staff. He pointed to the challenge of competing with private-sector salaries, noting that TD recently hired Nathalie Martineau, a former FINTRAC executive, as vice-president of anti–money laundering governance.

Calls for reform extend beyond former regulators. Christian Leuprecht, a professor at the Royal Military College of Canada and co-author of Dirty Money: Financial Crime in Canada, said Canada is falling well short of global expectations.

“This is a pervasive problem that governments have largely been happy to ignore,” Leuprecht said.

Estimates from Criminal Intelligence Service Canada suggest between $45 billion and $113 billion is laundered in Canada every year. Leuprecht said tackling a problem of that scale requires more than fines it demands serious investigative capacity.

“We have terrible capacity in this country to investigate,” he said, adding that banks face little risk of being caught or meaningfully punished. “Banks in this country have nothing to fear. Our financial intelligence unit is essentially an administrative compliance body.”

Meunier also wants FINTRAC’s powers expanded, including the ability to impose conditions on banks similar to the asset-growth cap U.S. regulators placed on TD’s operations south of the border.

FINTRAC said in a statement that, alongside its record penalty against TD, it required the bank to develop an action plan to address deficiencies and could impose further penalties if the bank fails to comply.

TD has said it is making the necessary investments and changes to strengthen its anti–money laundering program.

The federal government, meanwhile, says it is reviewing ways to strengthen Canada’s anti–money laundering regime. Following public consultations last year, it has tightened requirements for several non-bank entities, including casinos and title insurers. The Department of Finance says Canada has zero tolerance for financial crime and has invested nearly $379 million since 2019 to improve oversight and enforcement.

Regulators themselves acknowledge the growing risk. Peter Routledge, head of the Office of the Superintendent of Financial Institutions, said recently that anti–money laundering concerns now rank higher than he expected when he took on the role.

Still, some academics remain skeptical that tougher rhetoric will translate into real impact. Sanaa Ahmed, an assistant professor of law at the University of Calgary, said increased attention has not yet slowed money-laundering flows.

“There’s a lot of talk, but not that shift,” Ahmed said, arguing that governments benefit too much from inward flows of international capital to crack down aggressively. “It appears fairly clear that the government doesn’t want to.”

As the fallout from TD’s U.S. settlement continues, pressure is mounting on Ottawa to decide whether Canada is willing to match global enforcement standards or remain a comparatively low-risk environment for illicit financial activity.