Money laundering and bank risk: Evidence from <scp>U.S.</scp> banks

Abstract

Abstract We test for a link between bank risk and enforcements issued by U.S. regulators against banks for money laundering (ML) in a sample of 960 publicly listed U.S. banks over 2004–2015. ML‐related enforcements are associated with increased bank risk on several measures of risk with the result robust to a variety of estimation methodologies. Moreover, the impact of ML on bank risk is accentuated by the presence of powerful CEOs and only partly mitigated by large and independent executive boards.