Charles Schwab ( SCHW ) stock is trading lower on Thursday after TD Bank sold 40.50 million shares of Schwab common stock, worth about $2.6 billion as of Wednesday, reducing its ownership interest from 12.3% to 10.1%

According to Reuters, TD Bank is anticipating penalties from United States regulatory probes related to inadequacies in its anti-money laundering program. The sale of Schwab stock is intended to help mitigate the expected financial impact of these penalties.

The United States regulatory probes connects to allegations that Chinese drug traffickers used TD to launder approximately $650 million from 2016 through 2021. In addition, a bank employee took bribes which furthered the laundering of drug money.

“We recognize the seriousness of our U.S. AML program deficiencies and the work required to meet our obligations and responsibilities is of paramount importance,” TD CEO Bharat Masrani said in a statement. “Our remediation program is well underway. TD has strengthened its U.S. AML program.”

The U.S. regulatory probes are set to come to a resolution by the end of the year. The bank could face monetary and non-monetary consequences. Analysts expect that non-monetary consequences could mean restrictions on either natural growth or acquisitions for possibly years to come per Yahoo Finance.

"The big question remains: What could the non-monetary penalties be? Hard to tell at this point in time," Desjardins Capital Markets analyst Doug Young said in a report. "And we highly doubt that management will comment on this right now."

Separately,  Jefferies Financial Group Inc. analyst John Aiken said in a note to clients, "While the market now has certainty surrounding the amount of the charge, this is offset by the fact that it is larger than expectations and the impact this has on capital. The valuation impact will hinge on tomorrow's earnings, but it is already behind the eight-ball."

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SCHW Price Action: At the time of publication, Schwab stock is moving 0.76% lower at $64.07 per data from Benzinga Pro.

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