Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Regtech, Compliance, Governance
CFPB Recognizes FDX as U.S. Open Banking Standards Leader
Open Banking | Jan 9, 2025
Image: Freepik
FDX Earns CFPB Approval to Establish Secure Open Banking Standards in the U.S.
The Consumer Financial Protection Bureau (CFPB) has officially recognized the Financial Data Exchange (FDX) as a standard-setting body for open banking in the United States. This allows FDX to develop and maintain American standards for customers to securely share their financial data with authorized third parties. This data sharing aims to bolster competition and innovation in financial services by furnishing consumers with more choices and better control over their financial data.
CFPB's Personal Financial Data Rights Rule
In October 2024, the CFPB introduced the Personal Financial Data Rights rule that requires financial institutions to give consumers FREE access to their personal financial data along with the ability to transfer it to other (third party) providers upon request. To advance this initiative, the CFPB regulator setup a process to recognize standard-setting bodies that can create guidelines for secure and efficient data sharing. FDX is the first recognized standard-setting body under this new rule.
FDX's Role and Conditions
FDX is a non-profit operating in the U.S. and Canada with over 200 members including banks, fintech companies, data aggregators, and consumer groups. Its core mission is to develop a common, interoperable standard for secure consumer and business access to financial data records.
See: Canada’s Open Banking Journey: Interview with Steve Boms, Executive Director Financial Data and Technology Association – North America “FDATA”
The CFPB's recognition of FDX as a standard-setting body is valid for 5 years with the following conditions:
- FDX must avoid deals that give unfair advantages to certain companies to ensure standards are created without bias.
- FDX must track and share updates on how its standards are being used and provide public tools for companies to show they follow the rules.
- FDX must make its standards available to everyone for free with equal access including members and non-members.
Industry Perspectives
The recognition of FDX has garnered support from various industry stakeholders including the American Bankers Association who noted that FDXs API data format is already used to connect over 94 million consumer accounts and is available at no cost for parties that sign the FDX API License Agreement.
See: Open Banking in Canada Delayed to 2026, Favours Banks Over Innovation
Kevin Feltes, FDX CEO:
“This recognition provides helpful clarity to the market at a critical time. Many firms are running fast to come into compliance with the CFPB’s recent Open Banking regulation and give customers more control over their financial data. The recognition underscores FDX’s position as a leading forum for companies and nonprofits from across the financial ecosystem to collaborate on interoperable methods for secure, consumer-permissioned data sharing,”
Outlook
FDX's recognition opens the doors for fintech innovation and more choice and better services for consumers, and increased collaboration across the financial sector. The result? Consumers gain greater control, businesses unlock innovation, and the industry moves toward a more interconnected future.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Implications of Meta’s Fact-Checking Exit
Meta | Jan 8, 2025
Image: Freepik
Meta is Ending Its Robust Fact Checking Program to Prepare for Trump's Administration - Here's What It Means
Mark Zuckerberg, Founder Chair CEO of Meta posted a surreal video announcing the end of its professional fact-checking program (or was it simply an AI deepfake!). This means that on Facebook (Meta), Instagram, and Threads instead of having expert content moderators who work to remove toxic content, Meta will be using a crowdsourced approach called 'Community Notes' (similar to X) where users can add context/comments to posts. Meta will also loosen restrictions on controversial topics like gender identity and immigration that are often censored.
See: Kevin O’Leary’s TikTok Bid – Privacy and Innovation
Why the sudden change? Well in the video below Zuckerberg is prioritizing free expression and decentralized governance, however for many such drastic move looks more like a strategic decision to align with incoming President-elect Donald Trump and his administration's political interests and to reduce operational costs.
For Canadians, the sudden exit from fact checking is taking place as Meta continues to block Canadian news content in defiance of Canada’s Online News Act (Bill C-18). Combined, these decisions raise legitimate concerns about the potential of spreading misinformation and eroding informational trust on the platforms.
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Why Meta is Ending Fact Checking
Zuckerberg argues that 'fact checkers' are by nature politically biased, harming user trust (sound like a page from you know who?). He goes on to say that a crowdsourced approach is a more democratic way to correct misinformation.
Critics of such a community note system say that it's often slower and less reliable than a robust internal content moderation program, and they fear that misinformation could go viral before users add any corrections.
See: Meta’s Vision to Swarm Facebook With AI Users
After Elon Musk introduced 'Community Notes' on , hate speech increased by 50% and transphobic slurs rose by 62%. Advertisers of course didn't like their brands being associated with such toxic negativity and pulled back on spending, reducing ad revenue dollars and reputation.
Concurrent to this, Meta will also be relaxing content moderation rules to promote free speech. So fewer posts will be removed even if they are about sensitive topics or politically divisive issues that could spur hat speeches and conspiracy theories.
Likely Results of Meta’s Changes
Without fact-checkers, false and misinformation will spread faster than today and be harder to counter. Viral conspiracy theories and harmful posts will only increase. Such misinformation can cause harm in real life like encouraging violence or distrust of public institutions. Lies about health, elections or even immigration could have serious consequences.
As trust on Meta's platforms erode, many users will seek alternatives and safe havens that prioritize verified information. Different competing platforms like TikTok or decentralized networks like Mastodon could attract more users, if they offer stricter content moderation.
See: Chatham House: Global Digital Platform Regulation Insights
Governments may be forced to increase regulations to hold platforms accountable for spreading misinformation (similar to the EU's Digital Services Act or Canada's Bill C-18).
Closing Thoughts
Will other platforms follow Meta’s lead or seize the opportunity to differentiate themselves as trusted sources? The credibility of access to trustworthy information is at risk or does the crowd know best? Combined with Meta recently announcing their plans to release more AI personas into the wild (who hallucinate with wrong and unchecked content) we can only conclude with the caveat 'READER BEWARE', (and parents of young readers beware) vulnerable folks stay safe.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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How Trudeau’s Exit Will Impact Capital Gains Tax Policy
Capital Gains Tax | Jan 6, 2025
Image courtesy of AI
Trudeau's Resignation and Prorogation Create Uncertainty for Capital Gains Tax Changes
Yesterday, Prime Minister Justin Trudeau resigned and prorogued Parliament until March 24, 2025 as the Liberal party of Canada seeks to elect a new leader under the threat of U.S. tariffs. These political developments have left taxpayers and financial professionals seeking clarity on the future of the Capital Gains tax reforms but the CRA has yet to provide any guidance, and the Finance Minister has confirmed Canada will still collect capital gains taxes at the higher rate despite the suspension.
Capital Gains Tax Policy Background
In April 2024, the feds announced plans to increase the taxable portion of capital gains from 50% to 66.7% for corporations and for individuals with capital gains exceeding $250,000. The government said the new tax revenue would generate about $19.4 billion over five years to fund affordable housing initiatives. The final changes took effect on June 25, 2024, so the CRA has been collecting tax revenues per the new policy since then.
Impact of Parliament Suspension
However when PM Trudeau resigned on Jan 6 and announced prorogation, it left many proposed bills including the capital gains tax changes in limbo. This is due to a longstanding practice that the CRA collects revenues from proposed tax measures even before they are formally approved by Parliament. They effectively assume that the proposed tax legislation will eventually be enacted, especially if the bill is introduced by a governing party with a reasonable expectation of passing it.
CRA Position and Implications
As reported by Reuters, the CRA has indicated that they will continue to collect the proposed capital gains taxes during prorogation and in the event the government does not proceed with the measures it would then stop collecting revenues from the new measures. The agency did not clarify if they would provide refunds for any tax revenues collected during limbo status.
See: Guide: Lifetime Capital Gains and Entrepreneur’s Incentive
Suffice to say, if you are in the position of potentially paying a higher tax rate due to the proposed capital gains tax policy then you should hold off on selling any assets that may trigger capital gains taxes until the air is cleared. Since the new Liberal leader may move to cancel the controversial capital gains tax or possibly a new government administration will, too.
Conclusion
The future of the capital gains tax changes will depend on the new priorities of Trudeau’s replacement and the new government decides to focus on. Taxpayers are advised to work with tax professionals to manage uncertainty.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Meta’s Vision to Swarm Facebook With AI Users
AI | Jan 2, 2025
Image: Pixabay/Alexandra Koch
Meta’s Social Media AI-User Vision, Opportunity or Risk?
Well, we all anticipated this development was coming given AI's potential to amplify social intelligence for better or worse. As reported in the Financial Times, Meta intends to populate its platforms like Facebook and Instagram, with AI-powered user accounts with the goal of driving engagement and advancing GenAI's digital interactions. AI is technology's wonder pill that can pretty much do anything and in this case, it will be released onto social media networks to transform online communities. Sound about right for the beginning of 2025? What could go wrong?
Connor Hayes, Meta’s Vice President of Product for Generative AI, shared the vision:
“We expect these AIs to actually, over time, exist on our platforms, kind of in the same way that accounts do.”
Only 6 Months Ago...
Meta launched AI Studio in July 2024, allowing users to create AI personas or virtual bots complete with bios, profile images, while giving them the ability to generate and share content. These virtual avatars are programmed to learn and copy human interactions while seamlessly integrating into the daily fabric of Facebook and Instagram interactions.
Over 100,000 AI characters have already been created with AI Studio and, although most of them are still private, it's a trend that is gaining traction. Meta plans to expand access to them globally to game-change social interactions. To add a dash of strange to the recipe, Meta influencers can now create AI versions of themselves, giving followers digital access and unique ways to interact.
See: Meta’s AI-Powered Metaverse to Kickstart New Era in Gaming?
AI powered users is a broader industry trend happening across the social media landscape, representing a shift towards AI-centric user experiences. Platforms like Snapchat received a 50% year-over-year increase in engagement with AI tools and augmented reality features. TikTok is also experimenting with AI advertising tools like AI avatars and multilingual content.
Opportunities and Risks
1. Boosting Engagement and Innovation
Meta's AI adoption has already delivered impressive results...
- 500 million people use Meta's AI tools every month to improve their social media experience.
- 40 million users interact with AI features daily across Meta's platforms worldwide.
- Meta's stock price increased by 13% in August 2024 alone, reflecting strong investor support for the company's AI strategy.
See: FSB’s Warnings of Hidden Stakes of AI in Finance
AI personas are already revolutionizing user engagement by offering dynamic interactions, personalized content, and on-demand responsiveness. The bar of how users experience social media is getting higher all the time.
2. Amplifying Misinformation
Widespread adoption of AI-generated content by AI personas without safeguards could amplify false narratives and kill trust in social media platforms.
Becky Owen, former head of Meta’s creator innovations team:
“Platforms risk amplifying false narratives through these AI-driven accounts."
3. Dilutes the Value of Authentic Content
People against AI personas argue that without real life experience, emotions, or let alone the capacity to relate with humanity will ultimately devalue genuine content and credible voices online.
See: Disney Opens AI Unit to Accelerate Augmented Reality
“Unlike human creators, these AI personas don’t have lived experiences, emotions, or the same capacity for relatability,” Becky Owen
4. Safety Concerns
Critical concerns have also been raised about the potential misuse of AI interactions. Inappropriate content generation on some platforms highlight the pressing need for strict safety guardrails and regulation to protect users, especially in vulnerable demographics such as teenagers. See Tragic Incident Highlights AI Chatbot Risks for Teens
Closing Thought
Transparent and clear labelling of AI-generated content, strong misinformation safeguards, and ethical guidelines will hopefully help mitigate risks to the point that the benefits of this technology are worth it. The quote, 'genie is out of the bottle' seems more relevant than ever. As the lines between humans and AI interactions blur, governance and digital literacy must play an increasingly important role or we all suffer the consequences.
*Update* As reported by CNN, Meta's rollout of AI accounts on Meta and Instagram created major issues leading to user backlash so they already had to remove several problematic AI profiles. For example, one AI pretending to be a fitness influencer started recommending unsafe workout supplements. Another bot that was originally styled as a friendly chatbot became offensive and started responding inappropriately during even casual conversations.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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OSC Crypto Trading Platform Compliance Review Findings
Regulation | Dec 20, 2024
Image: Freepik/upklyak
Are Restricted Dealer Crypto Platforms Doing Enough to Protect Investors? The OSC Weights In
The Ontario Securities Commission (OSC) recently conducted a compliance review of 6 restricted dealers operating crypto asset trading platforms (CTPs) in Ontario, and published a summary of their findings, "Staff Notice 33-757" (see press release). The results? A mix of compliance successes and serious gaps, especially in investor protection practices. Here’s what the OSC found, why it matters, and key takeaways.
Focus of the Review and Findings
This was about the fundamentals: are platforms doing enough to ensure that the people using them actually understand the risks involved? Are they setting limits to protect clients from losing more than they can afford? Specifically, there were 3 areas of concern being investigated:
1. "Account Appropriateness Assessments"
Are platforms making sure accounts are appropriate for their users,based on their individual financial situations and crypto knowledge? CTPs are required to evaluate clients based on their experience with crypto assets, financial circumstances, and risk tolerance.
See: OSC Urges Stricter Rules on Gamified Investing Features
The OSC found that some platforms are using inadequate processes, such as relying only on self-reported user information without sufficient verification. Many platforms use a bare-bones approach to assess whether accounts are appropriate for their clients. They rely too heavily on online forms and didn’t follow up on inconsistencies or update/maintain client information over time. This means people are being approved to trade without a clear understanding of whether the crypto investment is the right fit for them.
2. "Investment Limits"
Are clients being prevented from investing more than they should in a high risk investment or asset? The OSC sets investment limits on certain crypto assets to protect investors (especially retail investors).
The OSC found that most crypto trading platforms implemented the 'investment limits' but lacked an effective monitoring system. CTPs need a good mechanism to enforce the limits and also prevent clients from exceeding them, which is a problem because of crypto's volatility.
3. "Client Limits"
Are there suitable safeguards in place to stop users from losing too much money? Client limits refer to the maximum value of crypto assets a client can hold on a platform.
See: Regulatory Updates for Crypto Asset Trading Platforms
The OSC observed that some platforms do not have clear policies or systems in place to monitor client holdings (and compare them against the limits). This appears to be the biggest issue in the compliance review since CTPs are supposed to restrict people from losing more than they can afford. Too often platforms either ignore the limits or don't act quickly enough if client limits are breached. Clients aren't being warned in time and in some cases no action is taken at all.
Takeaways for Your Business
These findings should be a wake-up call if you operate a fintech or crypto business. The OSC is sending the industry and specifically CTPs a message to review their policies and internal systems to ensure they comply and tighten the ship. Here are some takeaways.
- Think of on-boarding as your chance to really understand your clients. what their financial situation is, their knowledge of crypto, and how much risk they can handle. Make sure you check in with them regularly and all information is verified and documented. Not just once a year but whenever things change for them or in the market.
- Limits are there for a reason. It's how much a client can invest or how much they can lose, so baking these guardrails into your system is critical. Have systems in place to monitor and track these limits in real time. Don't wait until it's too late - automate the alert process.
See: UK vs. Canada: A Tale of Two Different Crypto Consumers
- Communication is key. When clients are getting close to their limits, let them know. But do it in a way that’s clear and educational. This isn't financial advice. You're giving them the tools to make better decisions.
- Stay up to date with all regulatory updates and changes that may impact your business, and to remain compliant.
Final Thought
Consider this your advanced warning. Are your processes strong enough? Are your systems up to date? Are you putting your clients first? The OSC’s findings are an opportunity to plug gaps, strengthen your approach, and turn compliance into a competitive advantage.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Open Banking Delayed to 2026, Favours Banks Over Innovation
Consumer-Driven Finance | Dec 18, 2024
Image generated by AI
Open Banking Delayed to 2026, Leaving Canada Behind While Favouring Banks
If you haven't realized it, Canada likes to delay the rollout of national projects (i.e, Trans mountain pipeline, national housing strategy, Phoenix pay system, high speed rail projects etc), and while it was painfully anticipated, the Canadian government announced its complete framework for the implementation of Consumer-driven Finance (Open Banking) in the 2024 Fall Economic Statement (FES), which will now be delayed to 2026. It's one of those 'we told you so moments' and this comes after years of promises and stalled progress. These delays and execution challenges put fintechs and consumers at a disadvantage, and undermines Canada's capacity for financial innovation and to remain globally competitive (among peer countries).
The announcement at least included more funding to the tune of $44.3 million over three years for the Financial Consumer Agency of Canada (FCAC) to enhance its capacity to supervise and regulate the consumer-driven finance framework. But it's the extended timeline that has left many industry stakeholders and investors questioning Canada's ability to keep pace with modern times. Countries like the UK and Australia have shown how robust open banking systems can unlock competition and innovation in financial services. Yet, Canada’s fragmented and overly cautious approach risks falling further behind these global leaders.
What’s the Problem?
The government is opting for a phased rollout, starting with mandatory participation of large, federally regulated banks. Then smaller financial institutions, such as credit unions, and fintech companies must opt in, assuming they can meet the same strict accreditation standards as large banks. This uniform approach to accreditation doesn't differentiate between the size or risk level between participants, imposing an undue burden on smaller players. A one size fits all requirement will make it harder for smaller players to participate, stifling the very innovation the framework is hoping to stimulate in the first place (sigh).
The plan is to start with limited functionality such as read-only data sharing, delaying more advanced functionality like payment initiation to the future (without a clear timeline leaving fintechs in the dark). It's likely the combination of prioritizing large incumbent banks while delaying access for smaller more innovative fintechs will hurt competition and innovation in the fintech sector.
See: Why Canadian Banks Are Fighting Open Banking
Originally the Financial Consumer Agency of Canada (FCAC) was adorned to supervisor and regulate open banking but adding to the complexity it was announced in FES 2024 that provincial regulators will now also be involved, risking fragmentation and unnecessary layers of bureaucracy. It echoes past mistakes made during the rollout of equity crowdfunding (also see NCFA's submission to Finance Canada re: urgent need for regulatory change and support) where fragmented provincial rules created confusion and inefficiencies, discouraging adoption while adding costs to compliant operators - only to realize this mistake several years later and work to harmonize regulations which was far too late, hurting the investment crowdfunding sector before it got off the ground.
Meanwhile, consumers are still dependent on screen scraping practices which is an outdated and risky practice with cyber security issues rampant.
Why It Matters
Globally, countries that have adopted open banking are seeing boosts to financial inclusion, productivity, and market driven innovation. In the UK for example, open banking has driven competition and productivity by making financial services more accessible and transparent. They are now advancing further ahead and expanding towards open finance.
In Australia, its Consumer Data Right policy is ushering in a new wave of fintech solutions that are giving consumers more choice and improving business efficiency.
Without any sense of urgency, Canada (again) risks falling further behind and sends the wrong message to investors and leading innovators that is 'Canada is hesitant to innovate' and struggles with implementing national frameworks that drive economic growth.
Lessons from the UK and Australia
Both the UK and Australia have implemented TIERED accreditation systems (not a one size fits all like Canada), which allows a diverse range of participants in open banking while maintaining high standards for security and consumer protection.
In the UK, the Financial Conduct Authority (FCA) employs a flexible, risk-based approach, allowing small fintechs to enter the market without being overwhelmed by compliance requirements. Early functionalities like payment initiation and account aggregation have become widely available, demonstrating how a structured yet inclusive system can deliver great value to consumers.
See: U.S. Open Banking Rule Lawsuit and Canada’s Implications
Australia's Consumer Data Right (CDR) framework also uses a tiered accreditation system to ensure participation by innovative fintechs. Smaller fintechs can partner with Accredited Data Recipients (ADRs) to access data under reduced compliance obligations using a “Trusted Adviser” model, allowing lower risk entities like financial advisors to provide services without heavy regulatory burdens. It's this tiered approach together with a clear timeline for expanded functionality that has accelerated adoption and innovation.
Finding Solutions for Canada
Canada’s framework should be more inclusive with less friction and more in line with global peers. It's uniform accreditation process is too ridged and should be a risk-based system. Smaller players offering low-risk services like a budgeting app should not face the same compliance burdens as payment processors or lending platforms. Adopting a tiered accreditation model like in the UK and Australia would stimulate a more innovative and competitive fintech environment.
Streamlining governance and oversight is also paramount. The FCAC should take a leading role with minimal provincial overlap to avoid jurisdictional conflicts and inefficiencies. The whole framework should encourage participation from coast to coast and reduce compliance burdens for fintechs.
See: Canada’s Open Banking Framework 2024 Preview
The FCAC should take their increased funding and fast track the open banking timeline and add clear deadlines for introducing core functionalities like payment initiation. Fintechs, investors, consumer alike all need more certainty and collaboration if open banking is to be more practical, widely adopted and successful.
Outlook
Canada should learn from global leaders in open banking who have amassed a ton of implementation experience if they want to avoid missteps. Canada needs to use this opportunity to boost its position as a global innovator in financial services. Delays hurt everyone from consumers to fintechs and the economy at large. It's time for Canada to step up and get open banking right.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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TD Bank Scandal Update: $3B Fine, Arrests, and Scrutiny
AML | Dec 18, 2024
Image: Pixabay/Alexandra Koch
TD Bank Under Pressure as ex-Employee Arrested and U.S. Senators Demanding Answers
Back in May 2024, the TD Bank money-laundering scandal hit wires with the CEO Bharat Masrani departing amid a monstrous $3B fine. Yes, that's the same TD Bank Chief that was seeking a level playing field with startup fintechs back in 2016. In October 2024, TD Bank pleaded guilty to violating U.S. anti-money laundering laws and agreed to pay over $3 billion in penalties, the largest fine ever in AML regulations. The bank also received an asst cap of approx $434 billion that restricts growth in U.S. operations until AML deficiencies meet regulatory requirements.
See: 4 AML Challenges for 2024 and Beyond
Since then, as reported in the Wall Street Journal, U.S. Senators Ron Wyden and Elizabeth Warren have written to TD’s Bharat Masrani asking for clarity on what bank executives knew and how they responded to a scheme that laundered over $470 million of drug sales through the Canadian bank, raising accountability questions.
Former TD Employees Arrested
While Da Ying Sze was the mastermind behind the $470 million laundering scheme, he was external to the bank and exploited the bank's vulnerabilities. In February 2022, Sze (also called David) pleaded guilty to multiple money laundering related charges and worked with at least 3 now arrested former TD Bank employees who facilitated.
- The first arrest took place in March 2024. Gerardo Aquino who worked at a branch in Hollywood, Florida was charged with taking bribes to open fake accounts that were used to transfer millions of dollars to Colombia, bypassing AML safeguards.
- The second arrest was in November 2024. Daria Sewell who worked in TD Bank's AML department in Manhattan, New York was charged with stealing personal customer data, and sharing this information on Telegram, which was used to bypass the bank's compliance efforts.
- The latest arrest came in December 2024, when Leonardo Ayala, a former employee in Doral, Florida who accepted bribes to issue debit cards and set up shell accounts that criminals used to launder money through the bank.
See: Elliptic Publishes New Research on AI and Money Laundering
According to the WSJ article, TD Bank employees flagged Da Ying Sze’s suspicious activity - some even joking about it in emails. One store manager warned a colleague, “You guys really need to shut this down LOL,” while another expressed concern that tellers felt uncomfortable handling the transactions. Higher-level executives were also aware of the risks. Senators are questioning the bank's accountability and how much executives knew about what was going on.
TD Bank's Repsponse
Spokesperson said:
“We appreciate the concerns expressed by Senators Warren and Wyden. TD has taken full responsibility for its AML [anti-money-laundering] program failures and is making significant investments and enhancements to meet regulatory obligations and help protect the financial system.”
Canadian Regulatory Response
In response, the Canadian government has proposed stronger anti-money laundering rules including tougher penalties, criminal charges for providing false information, and expanded powers for FINTRAC. The Fall Economic Statement (FES) of December 2024 included these changes but this year's FES was largely derailed by Chrystia Freeland, Canada's Finance Ministers' sudden resignation.
Closing
TD Bank’s AML scandal has adversely impacted the bank's financial performance and reputation. Fourth quarter profits fell short of expectations prompting a suspension of mid-term financial growth targets. More likely to come...
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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