TD Bank executives masterminded the rampant money laundering, but no one will be going to prison for now

The size of the fine was extraordinary, but in another respect the TD case was like any other bank enforcement case: None of the executives responsible will go to prison, at least for now. This trend of bank managers being allowed to commit criminal offenses goes back decades. Perhaps the most famous example of this is the 2008 financial crisis, when the government sent a single middle manager at Credit Suisse to prison.

While there could be more charges, the outcome of the TD scandal stands in stark contrast to the Justice Department’s treatment of crypto giant Binance a year ago. In this case, the agency not only fined a whopping $4 billion, but also brought charges against the company’s founder and CEO – resulting in a four-month prison sentence. Legal experts have noticed that there appear to be special rules when it comes to monitoring crime by bankers.

“Commentators have noted that bank executives largely avoided prison time after the financial crisis, even when the bank faced significant criminal liability,” said Vanderbilt law professor Yesha Yadav Assets by email. “Therefore, it should not be all that surprising that TD Bank executives are escaping personal criminal liability despite the staggering level of rule violations witnessed at the bank.”

A representative for TD Bank did not respond to a request for comment Assets. A Justice Department spokesperson referred to the question-and-answer portion of Garland’s press conference, in which he noted an ongoing investigation into individuals at TD, that the DOJ “continues to pursue aggressive action.”

“We anticipate further prosecutions,” Garland added, without clarifying whether they would target executives. The plea agreement also addresses the ongoing investigation.

The DOJ spokesman also shared court records of charges filed in connection with the enforcement action against individuals, including two TD Bank employees, although their exact identities remain unknown.

The Chickensh*t Club

As a stateless crypto exchange known for flaunting regulators and facilitating illegal financing from terrorists to drug traffickers, Binance earned one of the largest fines in U.S. history and a sharp rebuke from Garland. “Using new technology to break the law doesn’t make you a troublemaker, it makes you a criminal,” he said last November.

And despite Zhao’s relatively lenient sentence, which he served in a minimum-security facility in California, the crypto executive served time in a federal prison, while many of his colleagues in the world of traditional finance instead received only deferred settlements and fines.

Although TD Bank operates as a regulated financial institution in the US, the crimes it committed are similar to those committed by Binance. These include, among other things, the failure to implement money laundering controls and allowing billions of dollars in illegal money to flow through the platform, including from international drug traffickers. According to the DOJ, 92% of total transaction volume remained uncontrolled over a period of nearly seven years through April 2024.

In the plea agreement, prosecutors singled out TD executives, writing that the bank’s prioritization of growth over compliance and senior management’s decision-making led to the negligence.

“Binance has never been a regulated U.S. financial institution subsidized by the public sector,” Yadav said Assets. “TD Bank had to work specifically and concertedly to break a number of banking regulations.”

So why don’t any of its executives go to prison? The question is all the more pressing because financiers have not always had the means to get out of prison. In his 2017 book The Chickenshit ClubProPublica journalist Jesse Eisinger tells how federal prosecutors sought prison sentences against executives of failed energy giant Enron and its accounting firm Arthur Andersen in the early 2000s.

More recently, however, several factors have led the Justice Department to become more cautious in prosecuting bankers. These include a Supreme Court ruling overturning the Arthur Andersen convictions, the ever-changing door of Justice Department lawyers turning to no-fear law firms, and more and more prosecutors fearing litigation to lose. (The latter are part of the “chickenshit club,” according to former U.S. Attorney James Comey, who inspired the title of Eisinger’s book.)

Too early to tell

Although the DOJ did not announce any charges against TD executives as part of the settlement, the investigation is still ongoing. “It is premature to make judgments about the TD Bank case and individual prosecutions,” said Jay Shapiro, a Middlebury professor and former New York City prosecutor Assets by email.

According to a 2022 speech by Assistant Attorney General Lisa O. Monaco, the DOJ may also move to a tougher approach to individual accountability and corporate responsibility under the Biden administration.

In a speech at NYU Law School, Monaco highlighted recent trial victories, including those against Theranos founder Elizabeth Holmes, JP Morgan traders on commodity manipulation charges and a Goldman Sachs executive on bribery charges. A year later, of course, came the conviction of FTX founder and CEO Sam Bankman-Fried, even though, like Zhao, he also operated outside the boundaries of traditional finance.

“We need to do more and move faster,” she said, arguing that the DOJ’s priority is to complete investigations and file criminal charges against individuals while pursuing a resolution against a company. If that’s not possible, she said, prosecutors would try to outline remaining work on individual cases as well as a timeline. Shapiro argued that the TD agreement was consistent with Monaco’s comments.

“Our criminal investigations into individual employees at all levels of TD Bank are active and ongoing,” Garland said in his announcement of the charges. “No one involved in TD Bank’s illegal conduct will be barred from entry.”

It remains to be seen whether the DOJ will change its track record in prosecuting bank executives.