Executive summary

The unexpected failure of the Toronto-Dominion Bank (TD) and First Horizon merger on account of regulatory concerns over TD’s AML processes, specifically regarding suspicious activity reporting (SAR), came as a major shock to the banking industry. A deficient compliance framework at TD resulted in its inability to meet regulatory reporting obligations, resulting in loss of confidence in regulatory approval for the merger.

The failed merger offers a good opportunity for the industry to reflect upon and reassess the fitness of their AML arrangements to meet regulatory obligations. A compliance framework aligned with business strategies and regulatory requirements is of critical importance. Compliance, assurance, and monitoring plans should enable effective reporting up the corporate governance chain with transparency and accountability. A proactive risk management culture will require adequate safeguards for staff reporting suspicions, and a team with the necessary skills, expertise, and authority.

Adopting and maintaining leading practices for regulatory compliance is a business imperative, and any failure in this area can have severe consequences for strategic business programs.