FIN 341 Module 3 Milestone Two Example

Ethical Violations Analysis: Decisions, Duties and Stakeholders at TD Bank

[Student Name]

Southern New Hampshire University

FIN 341: Financial Regulations and Ethics

Milestone Two

[Instructor Name]

[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Ethical Violations Analysis: Decisions, Duties and Stakeholders at TD Bank

Introduction

Milestone One established what TD Bank did and which laws it broke. This milestone asks a different question for the Hartford bank's risk committee: which decisions were wrong, by what standard, and who was harmed. The distinction matters because the legal charges were brought against the institution, while the ethical failures were made by people at every level. Understanding those choices is the only way the client can tell whether similar choices are being made inside its own walls.

Three Levels of Decision

Leadership. Over several years, senior leaders kept anti-money laundering spending roughly flat while the bank grew, a policy the Justice Department called a "flat cost paradigm" (U.S. Department of Justice, 2024). Internal reviews warned that the program was falling behind. Leaders chose to accept that gap to protect efficiency targets.

Management. Compliance and business managers allowed large categories of transactions to stay outside automated monitoring, let investigation queues grow and failed to escalate patterns that branch staff and analysts had noticed.

Front line. Some branch employees accepted gift cards from a customer who deposited more than $470 million in cash and helped him avoid scrutiny. Others opened or kept accounts they had reason to doubt.

The front-line acts were the most obviously wrong and the most clearly criminal. The leadership decision was less visible but shaped everything below it.

The Leadership Decision Under Three Frameworks

Consequences. A utilitarian analysis weighs all benefits and harms. Holding compliance costs flat saved the bank money each year and helped its efficiency ratio, benefiting shareholders in the short run. Against that stand the harms: drug proceeds moved more easily into the legitimate economy, honest customers banked alongside criminal networks, employees faced prosecution and shareholders eventually absorbed about $3.09 billion in penalties and an asset cap. On any reasonable count, the harms far outweighed the savings.

Duties. A duty-based view asks whether the decision respected obligations regardless of results. A bank accepts a legal and moral duty to keep its services from being used for crime in return for its charter and deposit insurance. Knowingly underfunding the program that fulfills that duty treats the duty as optional, which fails the test even if no crime had followed.

Character. Virtue ethics asks what a responsible banker would do. Prudence, honesty and integrity would lead such a person to fund controls in step with growth and to act on warnings. A culture that celebrated convenience while ignoring warnings rewarded the opposite traits.

Stakeholders Harmed

Donaldson and Preston (1995) argue that firms owe consideration to all groups with a legitimate stake in their actions, not only shareholders. The table shows how widely the harm spread.

Stakeholders and harms in the TD Bank case

Why Ordinary People Went Along

Research on workplace misconduct suggests TD's problems were not only a matter of a few bad employees. Pooling dozens of workplace studies, one meta-analysis concluded that personal traits, features of the moral issue itself and the organization's ethical climate all predict misconduct, with climate and enforcement of a code among the strongest organizational factors (Kish-Gephart et al., 2010). TD's climate sent a clear signal: speed and cost control mattered most. Jones (1991) adds that people judge an issue by its moral intensity, including how close and concentrated the harm seems. For a branch employee, the harm from a large cash deposit felt distant and spread thin, while the gift card and the customer's satisfaction were immediate. The organization did little to make the harm visible.

Professional Standards Also Broken

The bank's conduct also fell short of standards that bankers set for themselves. Anti-money laundering specialists commit, through professional certification bodies, to report suspicious activity honestly and to resist pressure from the business. Bank codes of conduct commonly forbid employees from accepting gifts that could influence their decisions; the gift cards in this case broke that rule in its plainest form. Compliance officers, for their part, owe the board candid reports on whether the program works. Where internal reviews flagged shortfalls but leaders did not act, the problem was not that nobody knew the standard. It was that the people responsible decided the standard could wait. That pattern, knowing the rule and setting it aside for business reasons, is what separates negligence from an ethical failure.

Legal and Ethical Overlap

The employees who took gift cards committed acts that were both illegal and unethical. The leaders' budget decisions were unethical but became illegal only because, over years, they produced a program that failed the law's requirements. That gap is the most important lesson for the client: an ethical failure in a boardroom can turn into a criminal case long after the decision is made.

Questions for the Client's Board

The analysis suggests four questions the Hartford committee should put to its own management. Has compliance spending grown in step with assets, accounts and transaction volume, and if not, who decided that and on what evidence? When internal audit or examiners raise an anti-money laundering finding, how long does it take to close, and does the board see the aging list? Do branch employees know that accepting gifts from customers is forbidden, and is there a way for them to report pressure from a customer or a manager without fear? And when growth targets and controls conflict, which one wins in practice? Honest answers to these questions will show whether the bank's climate resembles TD's more than its leaders would like to believe.

Conclusion

TD's ethical failures ran from the top down. Leaders' choices to put cost and convenience ahead of a duty they had accepted made it easy for managers to look away and for some employees to take bribes. Milestone Three will examine the systems that turned those choices into a decade of failure.

References

Donaldson, T., & Preston, L. E. (1995). The stakeholder theory of the corporation: Concepts, evidence, and implications. Academy of Management Review, 20(1), 65-91. https://doi.org/10.2307/258887

Jones, T. M. (1991). Ethical decision making by individuals in organizations: An issue-contingent model. Academy of Management Review, 16(2), 366-395. https://doi.org/10.2307/258867

Kish-Gephart, J. J., Harrison, D. A., & Treviño, L. K. (2010). Bad apples, bad cases, and bad barrels: Meta-analytic evidence about sources of unethical decisions at work. Journal of Applied Psychology, 95(1), 1-31. https://doi.org/10.1037/a0017103

U.S. Department of Justice. (2024, October 10). TD Bank pleads guilty to Bank Secrecy Act and money laundering conspiracy violations in $1.8B resolution [Press release]. https://www.justice.gov/archives/opa/pr/td-bank-pleads-guilty-bank-secrecy-act-and-money-laundering-conspiracy-violations-18b