Canada, our neighbor to the north as it is sometimes called, evokes mainly pastoral and benign images: vast timber, mineral, and other oil and gas resources; the mighty Canadian National Railway featured in one of Gordon Lightfoot’s ballads; the splendor of the Banff resort and the glacial Lake Louise; famous hockey teams taking slap shots from the blue line; Sergeant Preston of the Yukon and his Alaskan Malamute named Yukon King; U.S. and Canadian military personnel working seamlessly for North American air defense; and a quasi-European and liberal socialist culture, with a hint of smugness.
But is Canada really all that neighborly?
Last week, the U.S. Department of the Treasury, Financial Crimes Enforcement Network, and the U.S. Department of Justice levied an enormous $3 billion fine on TD Bank — the New Jersey–based wholly owned subsidiary of the Canadian TD Bank Financial Group with nearly $2 trillion in assets, listed on the Toronto and New York stock exchanges. TD Bank was charged with inadequate monitoring of anti-money laundering protocols that allowed drug cartels to move over $670 million through TD Bank’s books over a six-year period ending in 2024.
The size of the fine is noteworthy. In 2017, Deutsche Bank was fined $630 million by U.S. and U.K. authorities for about $10 billion in transactions originating out of Russia. Over six years later, Deutsche Bank was fined $186 million by the U.S. Federal Reserve for inadequate progress made with anti-money laundering controls.
Besides the large and unprecedented fine, what is more remarkable is that TD Bank failed to catch this activity earlier. Ever since 9/11, regulators’ scrutiny of bank operations has intensified. The Federal Reserve, Comptroller of the Currency, Federal Deposit Insurance Corporation, and the Department of the Treasury have used the Bank Secrecy Act, Know Your Customer protocol, anti-money laundering requirements, and the databases maintained by the Office of Foreign Assets Control to police criminal activity flowing through the banking system.
Banking regulation further increased after the meltdown of Wall Street in September 2008 and subsequent demise of Bear Stearns and Lehman Brothers when the U.S. mortgage industry collapsed under a pile of bad credits and securitizations. Over the years, capital and liquidity requirements have been strengthened and an enhanced culture of compliance has pervaded major U.S. banks. How TD Bank, the tenth-largest bank in the U.S. with assets of $370 million, did not get or read the memo should plague the board of directors, senior management, and regulators. Further, the fines levied against TD Bank are quite surprising in view of the very conservative culture of Canadian banking.
But money laundering is not the only problem we have with our neighbor to the north. This year, among NATO’s 31 member countries, 23 are expected to spend at least 2 percent of GDP on defense. Canada is not among them — it spent only 1.4 percent in 2023, according to NATO figures. Remarkably, Canada does not expect to be at 2 percent until after 2030. Canada’s current defense outlay puts the world’s ninth-largest and G7 economy of over $2.1 trillion slightly ahead of Slovenia, the 83rd largest, with a GDP of only $62 billion. Enjoying America’s protective umbrella like Europe, Canada has been allowed to allocate more resources to social programs.
Canada’s hesitancy to fund its share in NATO is even more striking because of the joint collaboration between Canada and the United States in the North American Aerospace Defense Command near Colorado Springs, an undertaking whose mission is to defend North America against airborne threats. Historically, Canada was also an integral part of the Normandy landings at Juno Beach on D-Day.
While it has been largely forgotten, in June of 2023, Canadian wildfire smoke — mainly from Alberta and British Columbia — spilled into 18 U.S. states, compromising air quality.
A Rutgers study assessed the detrimental impact of particulates, particularly in New York City and New Jersey. The only apologies from Canada seem to be online satires. If the U.S. had done this to another country, it would be hauled before the International Court of Justice in the Hague — and sued in perpetuity.
Typically, U.S. presidents have visited Ottawa a few months after being elected — but not so Donald Trump. Understandably, the Canadians did not wish to read much into this. It was Trump who had harshly criticized members of NATO for underfunding of their NATO commitments, and the resulting increased contributions have continued during the Biden administration.
The obvious question is how relevant is Canada in the current geopolitical construct? In view of China’s efforts to disrupt the trade and investment rules since the end of World War II and undermine the U.S. dollar — to impose its Beijing-dominated command and control system known as the Belt and Road Initiative, and to end the hegemony of the United States and Europe — perhaps an early destination for a new U.S. president should be Beijing, not Ottawa. (RELATED: A Specter Is Haunting China)
In any event, the next administration should call on Canada to strengthen its banking controls and accelerate its compliance with NATO’s 2 percent requirement — and be neighborly.
Frank Schell is a business strategy consultant and former senior vice president of the First National Bank of Chicago. He was a Lecturer at the Harris School of Public Policy, University of Chicago and is a contributor of opinion pieces to various journals.
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