Impact on the firm value of financial institutions from penalties for violating anti-money laundering and economic sanctions regulations

Kathleen Donnelly Gowin, Daphne Wang (), Surendranath Rakesh Jory, Robert Houmes and Thanh Ngo

Finance Research Letters, 2021, vol. 40, issue C

Abstract: This study examines the valuation effects of anti-money laundering (AML) enforcement actions and the Office of Foreign Assets Control (OFAC) economic sanction violations on U.S. financial institutions (FIs). Using a hand-collected sample of 308 enforcement actions issued between 2000 to 2018, results show that a civil money penalty (CMP) adversely affects a bank's value in the next quarter. Neither the magnitude, nor the type of AML-OFAC violation, and neither the bank's ability to deal with an enforcement action― as proxied for by efficiency ratios and governance mechanisms―are able to moderate the adverse effect of the CMP.

Keywords: Anti-money laundering (AML); Office of foreign assets control (OFAC); Economic sanction regulations; Civil money penalty (CMP); Financial institutions (search for similar items in EconPapers)
JEL-codes: G21 G22 G28 G30 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320301550

DOI: 10.1016/j.frl.2020.101675

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