As he prepares to take the CEO reins in April, TD’s chief operating officer, Raymond Chun, said Tuesday the bank has learned some crucial lessons through its anti-money laundering debacle, including the significance of experienced staff.

As Canada’s second-largest lender digs into the AML remediation work it must do to satisfy regulators who hit the bank with $3.09 billion in fines, TD has shelved growth targets and embarked on a comprehensive strategic review. That comes as the bank’s expenses soared, amid increased spending on staff and its risk and control infrastructure.

TD entered a plea agreement with the Justice Department in October over deficiencies in its money laundering safeguards that allowed criminals to funnel millions of dollars tied to illicit fentanyl through the bank’s accounts, according to a multiagency investigation. The Toronto-based bank is also restructuring its balance sheet to reduce its U.S. retail assets by about 10% to comply with a $434 billion cap imposed by the Office of the Comptroller of the Currency. 

Beyond the executive level, TD has bolstered first- and second-line AML staff, and made hires in risk and audit areas, Chun said Tuesday during his RBC investor conference appearance. Those employee additions have made the bank confident it can deliver, in a timely manner, what regulators are seeking, he said.

“You need to have talent that is commensurate with the size and complexity of a bank [like] TD,” Chun said. “Talent at the most senior levels in AML is absolutely one of the top priorities that we have as an organization.”

The bank has a new head of U.S. financial crimes and risk management, and has “rebuilt” its entire AML team in the U.S., Chun said. “That talent then will determine what investments are required,” as well as capabilities needed and the tools and platforms the bank should be using, he said. 

TD’s AML woes have also underscored the importance of external benchmarking, Chun said. 

More broadly, “TD Bank has been growing our expenses probably disproportionate to the industry. And so we certainly have not not spent money,” Chun said. But “did we spend it in the right places, with respect to AML?” 

“The combination of having the right talent and consistently doing external benchmarking will allow us to make sure that we are providing the appropriate resource funding and support, to make sure that we’re staying relevant,” he said.

The bank is “100% committed” to its U.S. business, Chun said when asked if a market exit was on the table. Through the strategic review that’s underway, the bank aims to come out with a “renewed focus” around optimizing its return on equity in the U.S., which is likely to mean the bank offloads some of its loan portfolios, Chun said. 

TD is also considering its stake in Charles Schwab, currently at 185 million shares, as part of that review. The bank plans to share decisions made as part of the review during its quarterly earnings calls, Chun said. As TD set aside money for expected AML probe penalties, the bank sold 40.5 million Schwab shares last August, dropping its stake in the company to 10.1% from 12.3%.

Chun faces a tall order once he takes over as CEO. His priorities this year include ensuring the bank’s AML remediation work remains on track and that the lender completes the management actions required in 2025. He also wants to complete the strategic review and consider where to allocate capital to spur growth in the bank’s Canadian businesses and TD Securities unit. And Chun aims to complete the restructuring of the bank’s U.S. balance sheet and bond investment portfolio – and ensure the bank continues to attract and retain talent.

TD is plowing money into the remediation work, and Chun acknowledged more costs could arise. Since regulators have mandated a look-back period, “there may be some things that come up that will require additional investments,” he said. 

“This is a multiyear journey,” he said.

TD was required by the DOJ and Financial Crimes Enforcement Network to retain independent compliance monitors to oversee the bank’s remediation. The bank has submitted its list of candidates for the monitorship to both the DOJ and FinCEN, Chun said, and both entities approved using the same monitor. 

“We look forward to working with our monitor to make sure that we are delivering a market-leading AML platform,” Chun said.