TD Bank Shakes Up Leadership Amid Anti-Money Laundering Scandal

TD Bank Group, which has been embroiled in a money laundering scandal in the US, has announced that Raymond Chun will succeed CEO Bharat Masrani, who is retiring next year.

Chun, who took over as head of Canada’s private banking sector in December of last year, will be named chief operating officer on November 1. He will then take over the top job when Masrani officially steps down on April 10.

The leadership shakeup, announced Thursday, includes several other executive changes. It comes as the bank works to resolve investigations into deficiencies in its anti-money laundering program in the U.S. that allegedly allowed hundreds of millions of dollars in illegal drug profits to flow through the bank.

Masrani announced his retirement after 38 years at the bank and a decade in charge, saying the program’s shortcomings were his fault.

“This happened under my watch as CEO and I take full responsibility,” he said during a conference call.

“I will continue to promote and lead the critical remediation program necessary to meet our obligations and responsibilities and strengthen our risk and control base.”

The investigations posed a major hurdle for the bank and helped to defeat its proposed $13.4 billion takeover of US bank First Horizon in May last year.

Chun said during the call that recovery is the top priority as the bank enters its next chapter.

“TD is a critical part of our financial system and our economy.… We also have a big challenge ahead of us.”

WATCH | TD Bank says it has not responded to ‘‘Suspicious activity’ at US facilities:

TD Admits Money Laundering Has Not Stopped at US Branches

After a major U.S. investigation, TD admitted it failed to stop criminals using its branches to launder money. The Canadian bank is one of several banks under investigation by U.S. government and financial regulators.

Timing of leadership change a surprise to some

Some analysts said both the timing and the appointment of Chun, whose experience is primarily in Canada, were a surprise.

“We believe some investors were open to the possibility of TD selecting an outside CEO candidate, someone with significant experience in the U.S. banking industry (and experience with U.S. regulators), given the bank’s (anti-money laundering) issues,” National Bank analyst Gabriel Dechaine said in a note.

The bank has taken more than $3 billion in charges related to the investigations and has said it expects the investigations to be completed globally by the end of the year. But Dechaine said there are concerns that regulators will impose financial constraints on the bank that could last much longer.

“We note that these issues, beyond regulatory fines, could have long-term implications for TD’s US bank operations,” he said.

WATCH | How drug dealers moved money through TD Bank:

How a Fentanyl Crime Gang Used a Canadian Bank to Do Business | About That

TD Bank is at the center of a U.S. Department of Justice investigation into a massive global money laundering scheme. Andrew Chang analyzes what we know from court documents and inside sources to explain how the scheme unfolded and what red flags analysts say should have been spotted.

The conference call with analysts was more like a job interview for Chun, where he was asked what problems he had been asked to solve, what experience had prepared him for the top job and why he was the right person for the job.

Masrani said Chun is the right leader at the right time, while Chun himself said he has extensive experience across industries.

“I have the following experiences with complex matters, dealing with regulators and mapping out complex strategies as we move forward,” Chun said.

Canaccord Genuity analyst Matthew Lee saw Chun’s appointment as a potentially positive sign for the investigation’s progress, as the new CEO has also held senior roles in TD’s direct investments, insurance and asset management divisions over more than three decades.

“It is unlikely that the company would appoint a new CEO without a clear roadmap for a solution (against money laundering) and therefore the choice of Mr Chun (who has experience primarily in Canada) may indicate that the company is comfortable with both the fines and the non-monetary sanctions,” Lee said in a statement.

More shifts among managers

TD also announced Thursday that Riaz Ahmed, head of the wholesale banking group and president and CEO of TD Securities, will retire at the end of January 2025.

Other changes to the executive ranks effective Nov. 1 include the promotion of Sona Mehta, currently executive vice-president of real estate secured lending, everyday banking, saving and investing, to group head of Canadian personal banking. Tim Wiggan, group head of wealth management and insurance, will become group head of wholesale banking and president and CEO of TD Securities.

Paul Clark, currently executive vice president of private wealth management and financial planning, will become senior executive vice president of wealth management.

The management changes were announced as 2,500 members of TD’s senior management gathered in Toronto for their annual conference.