In a recent opinion piece published in The Globe and Mail, John Turley-Ewart, a regulatory risk management consultant and Canadian banking historian, argues that Canada's Office of the Superintendent of Financial Institutions (OSFI) was ultimately at fault for TD Bank's US money-laundering issues.
Last month, TD Bank set aside a $3 billion provision for anticipated US regulatory penalties due to inadequate anti-money laundering (AML) controls, which allegedly allowed $653 million in illegal drug money to be laundered through its US branches between 2016 and 2021. As a result, TD declared a quarterly loss and halted its US expansion plans.
In the article, Turley-Ewart criticizes OSFI for its allegedly ineffective supervision, particularly regarding its 2014 Guideline E-13, which "spells out the key controls a bank must have in place to manage regulatory compliance risk 'in any jurisdiction in which it operates.'" OSFI failed to recognize the risks TD faced in the US, he claims, and did not intervene early enough to prevent the current situation.
In May 2024, OSFI conducted a delayed assessment that confirmed "deficiencies and weaknesses in TD's AML controls." This assessment suggested that more effective oversight could have prevented the current issues. The situation is embarrassing for Canada, Turley-Ewart argues, questioning what steps OSFI is taking to address its own alleged shortcomings. Canada's international reputation for AML compliance may be at stake, he warns, ahead of an upcoming assessment by the Financial Action Task Force.
Notably, OSFI has emerged as a global leader in the regulation and supervision of employee behavior in recent years. In a speech delivered in May, Superintendent Peter Routledge explained the philosophy behind this focus. "[N]on-financial risks are, in fact, prudential risks and OSFI must supervise and regulate them in a manner equivalent to its supervision and regulation of financial risks," Routledge said.
Earlier this year, Starling Insights published a Deeper Dive report entitled "Physician, Heal Thyself," which discusses global efforts to hold regulators accountable for their organizational culture and the outcomes such culture may drive. Regulators, that is, are increasingly being held to a standard regarding culture and conduct that they have emphasized in recent years among the firms they oversee. ▸ Get the Report
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