Eric Seung Chul Lee

We provide the first comprehensive causal analysis of the economic impact of international anti-money laundering (AML) standards by leveraging the staggered timing of Financial Action Task Force (FATF) evaluations. Stronger AML policies lead to a 4% decline in bilateral trade, primarily in categories susceptible to trade-based money laundering, but this effect is reduced when trading partners' policies become more aligned. FDI increases by 8%. FATF assessments increase detection of money laundering cases by 37% but show no measurable effect on fraud or drug and human trafficking. Our findings highlight the benefits and costs of coordinating global anti-money laundering efforts.

Using firms' exposure to areas of unprotected biodiversity importance and announcement of the 30-by-30 initiative, we employ a difference-indifferences design for corporate bonds. Mutual funds with high Sustainability Ratings decrease their holdings of bonds issued by nature-dependent firms with high biodiversity exposure. This decrease persists throughout Biden Administration's tenure and is not reversed following the 2024 Presidential Election. We also observe similar effects across different maturities. We interpret these results as institutional investors are not hedging against administration-specific or longer-term financial risk. Overall, our results support the existence of non-pecuniary preferences related to biodiversity.