Journal of Financial and Quantitative Analysis· 2026Q1
The Weight of Compliance: Anti-Money Laundering Enforcement, Banking Sector Composition, and Lending
- 3citations
- Q1SCImago
- 2026year
Short summary
Strengthened anti-money laundering (AML) enforcement in the US disproportionately increases compliance costs for small banks, leading them to contract while large banks expand, particularly in areas with high money laundering exposure.
AI-generated from the title and abstract; the full text is not read.
Key points
- Strengthened AML enforcement increases compliance costs more for small banks than large banks.
- In counties with higher money laundering exposure, small banks contract and large banks expand.
- This shift leads to an increase in standardized, government-supported, and secured lending.
- Local economic outcomes improve, with small establishments growing, non-tradable employment and wages rising, and real estate prices increasing.
AI-generated from the title and abstract; the full text is not read.
Abstract
Abstract We examine how strengthened anti-money laundering (AML) enforcement affects the U.S. banking sector. Heightened enforcement disproportionately raises compliance costs for small banks, especially in counties more exposed to money laundering. In these areas, small banks contract while large banks expand, increasing standardized, government-supported, and secured lending. While aggregate county-level credit does not decline differentially, local outcomes improve. Small establishments grow, non-tradable employment and wages rise, and real estate prices increase. The evidence is consistent with a reallocation mechanism in which AML enforcement shifts activity toward large banks, potentially improving intermediation quality through changes in the composition of local financial intermediation.
The authors' abstract, as published at the source. Journal of Financial and Quantitative Analysis, 2026 · DOI ↗
Continue with a free account
Ask the paper: 3 free questions a day about this paper; save it, get its citation, new summaries every day for your field. Takeaways are Premium.
Continue free on the webSign in with Google or Apple; no card needed. You come back to this paper.
On your phone:
Field: Finance
FinanceEconomics, Econometrics and Finance