Well in a move that screams” we really messed up,” TD Bank, Canada’s  second-largest money-making machine just got caught with its pants down in the anti-money laundering (AML) department. In short, the company has been found setting aside $3 billion, that’s billion with a “B”, to cover potential fines from U.S. regulators. Translation: Tell me you’re shady without telling me you’re shady. 

(Source: Giphy)

Yet, while TD Bank has come forth to admit their significant shortcomings in its AML practices, the market is definitely starting to wonder if it’s time for a change at the top. For example, current CEO Bharat Masrani, who has been steering the ship since 2014, is now facing some serious heat - while also being at risk of catching the CEO Swap Virus sweeping through prominent corporations. 

(Source: PYMTS)

Now of course, for those paying attention, Masrani has been the face of TD’s aggressive expansions in the U.S. market - but with this scandal, coupled with the firing of a dozen employees earlier this year (ultimately hammering criminal charges against some)....

And the recent collapse of TD’s $13.4 billion plan to acquire First Horizon Bank, investors are starting to ask if it’s time for new leadership to clean up the mess. 

(Source: Giphy)

For instance, when a bank sets aside $3 billion for potential fines, it’s not just a minor hiccup. Not by a long shot. In fact, what it does suggest is that TD’s “AML” practices were not just subpar, but potentially negligent. Like writing a $400k mortgage loan to a borrower with FICO’s below 500, knowing good and well that loan ain’t getting paid back. (2008 type of negligence for those who didn’t know). 

But it’s not just the negligent vibes that are causing investors' stomachs to turn. I mean sure, this is one of the largest provisions for fines related to AML issues that we’ve seen in recent years; putting TD in the same league as some of the worst compliance offenders in banking - 

(Source: Compliance Week)

However, this $3 billion chunk of change is also set to hit the bank's bottom line, affecting earnings and potentially leading to a reduction in dividends… or worse, a drop in stock price. Meaning, it’s clear that TD bank is NOT screaming any bullish confidence for investors as the stock is already sitting -7.28% YTD. 

Now of course, while there aren’t any solid details yet, is obviously playing it safe - avoiding any major moves before the dust settles. But one thing for sure, the board's eyes are wandering for new leadership. However, even TD Bank's succession plan is about as stable as a crack head's last tooth. 

(Source: Giphy) 

For example, Michael Rhodes, the guy everyone thought was next in line, has already packed his bags and left the building. His departure has thrown TD’s succession planning into uncertainty—just what the bank doesn’t need in the middle of a crisis. Meanwhile, the PR team is out there trying to convince everyone that TD has everything under control, in hopes of not becoming the next Wells Fargo. Because you know, only scammers work there, amirite?

(Source: Imgflip)

In the end, as TD scrambles to fix its AML issues, it’s clear that they are facing a nightmare scenario to their bottom line and to regulators. And while a change at the top could be just what the bank needs to restore investor confidence…

It’s obvious that TD is facing one of the toughest challenges in its history, and they are going to need a different breed of Canadians (not the nice kind) to maneuver its way out of the rough waters. 

(Source: Giphy) 

At the time of this writing, TD Bank is up +0.02% on the day, (down -7.28% YTD). 

Stocks.News holds no positions in companies mentioned in the article.