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

Impact on the firm value of financial institutions from penalties for violating anti-money laundering and economic sanctions regulations
Impact on the firm value of financial institutions from penalties for violating anti-money laundering and economic sanctions regulations
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 and 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.
Anti-money laundering (AML), Civil money penalty (CMP), Economic sanction regulations, Office of Foreign Assets Control (OFAC), financial institutions
1544-6123
Gowin, Kathleen
259d626f-2ae8-4e58-9cd2-a4de98b131f3
Wang, Daphne
240f4ddf-31d7-4e80-88cc-698148548c58
Jory, Surendranath
2624eb24-850a-48f6-b3c6-c96749b87322
Houmes, Robert
b91aa66a-da39-4360-82cb-2c40854837ce
Ngo, Thanh
852ea7b9-fd74-4a39-9281-87626e50886b
Gowin, Kathleen
259d626f-2ae8-4e58-9cd2-a4de98b131f3
Wang, Daphne
240f4ddf-31d7-4e80-88cc-698148548c58
Jory, Surendranath
2624eb24-850a-48f6-b3c6-c96749b87322
Houmes, Robert
b91aa66a-da39-4360-82cb-2c40854837ce
Ngo, Thanh
852ea7b9-fd74-4a39-9281-87626e50886b

Gowin, Kathleen, Wang, Daphne, Jory, Surendranath, Houmes, Robert and Ngo, Thanh (2020) Impact on the firm value of financial institutions from penalties for violating anti-money laundering and economic sanctions regulations. Finance Research Letters, [FRL_101675]. (doi:10.1016/j.frl.2020.101675).

Record type: Article

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 and 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.

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Paper accepted in FRL - Accepted Manuscript
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Accepted/In Press date: 27 June 2020
e-pub ahead of print date: 28 June 2020
Keywords: Anti-money laundering (AML), Civil money penalty (CMP), Economic sanction regulations, Office of Foreign Assets Control (OFAC), financial institutions

Identifiers

Local EPrints ID: 442171
URI: http://eprints.soton.ac.uk/id/eprint/442171
ISSN: 1544-6123
PURE UUID: a23f12f5-6a0e-4e20-ab53-53598e92b674
ORCID for Surendranath Jory: ORCID iD orcid.org/0000-0002-8265-0001

Catalogue record

Date deposited: 08 Jul 2020 16:30
Last modified: 27 Jun 2022 04:01

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Contributors

Author: Kathleen Gowin
Author: Daphne Wang
Author: Robert Houmes
Author: Thanh Ngo

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