Document Type

Practitioner Comment


Regulators have been punishing the banks not because of any actual money laundering, but rather because the banks did not meet the regulators’ own subjective vision of the ideal anti–money laundering or counter–terrorist financing program. However, no one has attempted to show that the supposedly ideal vision of an anti–money laundering or counter–terrorist financing program would actually be more effective than the programs the banks have in place.

Even if the regulators’ ideal vision of an anti–money laundering and counter–terrorist financing program would in fact be more effective than what exists now, it is unclear if the benefits of such a program would outweigh the very serious costs. The optimal level of banking regulation necessarily requires some sort of cost-benefit analysis.

Indeed, legal scholars, Congress, and the courts have long advocated for agencies to conduct qualitative and quantitative assessment of all consequences of their regulatory actions. Under most circumstances, regulators should undertake an action only if its benefits outweigh its costs. Thus, banking regulators’ utter silence regarding the costs and benefits of their subjective vision is troubling, and results in bad public policy.



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