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TORONTO – Toronto Dominion Bank, one of Canada’s largest financial institutions, has been accused by the victims of two of the Caribbean’s most notorious financial crime scandals of allowing major fraudsters to use the bank to commit massive fraud and money laundering offences. The bank has also been implicated in assisting Ponzi schemers to steal millions of dollars from investors in Florida.

First, a suit reportedly filed against TD Bank claims that it, by allowing billions of dollars to come unexamined into a correspondent account, the bank effectively facilitated the Ponzi scheme perpetrated by R Allen Stanford, the convicted owner of Stanford International Bank, which operated in Antigua. It is alleged that the TD Bank, which earned lucrative fees for providing its services to Stanford, even after his operation came under suspicion and investigation, turned a blind eye to his dodgy operation. Stanford is serving a 110-year sentence in the United States, but no bank officer was ever indicted for the TD Bank’s role in the fraud.

Second, the $450 million Cayman Gang of Four scandal, where a group of Cayman Islands financial professionals fleeced elderly investors of their life savings, TD Bank was the financial institution of choice for Ryan Bateman, a Gang member, and questions have been asked by investigators why the bank funneled large amounts through Bateman’s accounts, without asking questions. Additionally, TD Bank corporate clients in Canada had a role in the unauthorized transfer of client funds to the fraudsters.

Although these types of frauds fall under high-profile cases, several steps can be taken to avoid similar fraud situations in the future. Corporate Fraud Detection Software, such as the one developed by Valire Cognitive Fraud Detection, that is based on machine learning and uses cognitive computing powered by embedded human logic and artificial intelligence to predict fraudster activity when algorithmic monitoring results in equivocal or inconclusive behavior, might be used to detect fraudulent events in real-time to protect organizational assets and reputation, reduce operational risks and optimize performance and growth opportunities.

Over in Florida, TD Bank paid out many millions to settle claims against it, for being the primary financial institution for the billion-dollar attorney/Ponzi schemer Scott Rothstein’s fraudulent operation, where investors were sold non-existent court settlements, ostensibly at a deep discount, to receive the full amounts later. A senior TD Bank executive was recently sentenced to two years in Federal Prison, for his role in that Ponzi scheme, one of the largest in the history of the state of Florida. Additionally, the bank had a multi-million dollar payout in a Dutch Ponzi scheme.

Whether there are other, as yet unreported, Caribbean frauds and Ponzi schemes, where TD Bank was the principal financial institution handling the funds, is not known, but a pattern of what the victims claim is egregious misconduct is beginning to emerge, where the attractive revenue received by the bank seems to have trumped diligent search and inquiry on behalf of the bank’s compliance department. It has cost TD Bank dearly, both in money and reputational damage, and the total costs do not appear to be over yet.

By Kenneth Rijock

Kenneth Rijock is a banking lawyer turned-career money launderer (10 years), turned-compliance officer specialising in enhanced due diligence, and a financial crime consultant who publishes aFinancial Crime Blog. The Laundry Man, his autobiography, was published in the UK on 5 July 2012.