Malia Lazu

“A record $3 billion fine.”

With these words, media outlets across the country trumpeted a judgement won by the U.S. Justice and Treasury against TD Bank last month to settle charges that it did not properly monitor money laundering through its accounts by drug cartels that reportedly transferred more than $670 million through TD accounts.

Levying a fine is a criminal justice response. However, it is too narrow to repair the harm caused when banks make big mistakes. While some people are calling for jail time, as someone who does not believe the prison system rehabilitates anyone, I offer an alternative view.

Restorative justice would be a positive next step for TD Bank to help repair the societal harm that has been caused. Restorative justice is defined as a process of examining the harmful impact of wrongdoing, and then determining what can be done to repair that harm. The person or people who are culpable are held accountable; as they accept responsibility, they play an active role in reparation and restoration.

Restorative processes are used in schools and communities around the country.  I even engage in these practices with my corporate clients to help them deal with specific incidents or events that may have caused harm, whether internally or externally.

Fine Creates Reputational Risk for All

The entire financial industry has been dealing with reputation risk. A lack of trust in the bigger players has opened the door to opportunity that’s being exploited by fintech. As Chime CEO Chris Britt said in an interview last year:  “The trust levels that mainstream Americans have in banks is extremely low, and that was part of the opportunity that we pursued.”

Trust is further eroded in the face of egregious behavior for the sake of profits – especially when banks refuse to make even small adjustments to expand credit for working families.

Acting Comptroller of the Currency Michael Hsu minced no words in his statement: “TD Bank’s persistent prioritization of growth over controls allowed its employees to break the law and facilitate the laundering of hundreds of millions of dollars. The bank’s blatant risk management failures attracted illicit actors and are egregious and unacceptable.”

Some are asking if penalties should include jail time for executives. As American Banker summed it up: “TD is apparently ‘too big to jail.’”

Prison sentences might seem fair, especially since people who have laundered far smaller amounts of money are threatened with the same. A Google search brought up a recent example of a Louisiana man who pleaded guilty to money laundering and now faces a sentence of up to 10 years imprisonment, three years of supervised release and a fine of up to $250,000. The amount of money involved in his crime was reported to be $1,157,154.39.

Restorative justice, though, turns our attention in a different direction.

How Restorative Justice Can Help

TD Bank’s response mirrored the first step in the restorative process: it accepted responsibility for its actions. TD Bank CEO Bharat Masrani issued a statement acknowledging “a difficult chapter in our bank’s history” and “failures took place on my watch,” followed by apologies to “all stakeholders.”

This sets the stage to consider the harm that has been done, far beyond the need to beef up TD’s anti-money laundering program. The harm caused here traces back to the drug cartels and the illicit trade that deeply affects American society. We will never know the full extent of that harm.

There are many processes TD Bank can engage in to help rebuild trust in the bank and the financial industry by modeling good behavior by working to repair some harm caused. This might include:

• Expanding flexibility for small business credit and offering money management assistance.
• Directing the TD Charitable Foundation to find ways to support and fund drug response and rehabilitation.
• Continue to resource their award-winning DEI and corporate social responsibility programs which has helped TD build trusting relationships with all communities.

We don’t necessarily need heads to roll. Rather, we need heads to reflect on when greed is not good.

Malia Lazu is a lecturer at the MIT Sloan School of Management, CEO of The Lazu Group, former Eastern Massachusetts regional president and chief experience and culture officer at Berkshire Bank and the author of “From Intention to Impact: A Practical Guide to Diversity.”