Treasury Department Implements New Guidance for Domestic Banks
NEW YORK – The U.S. Treasury Department took steps on Friday to align domestic banks with the policies of the Trump administration, particularly regarding immigration. This move includes issuing new guidance that enables banks to swiftly share information about suspicious customers. Additionally, banks are encouraged to flag signs indicating that a customer may lack legal immigration status.
This initiative is part of a broader effort by the administration to remove undocumented workers from the banking system without imposing explicit requirements on financial institutions. The government is framing these changes as a crackdown on fraud and crime, rather than a direct focus on immigration issues.
During remarks at a banking conference in Houston, Treasury Secretary Scott Bessent emphasized the importance of this information in combatting financial crime. He stated, “The information you have could help us thwart cartel financiers, disrupt money laundering networks, expose labor exploitation, and protect taxpayers from fraud.”
Bessent’s statements and the updated guidelines build on an executive order signed by President Trump in May. This order mandates that banks closely scrutinize the citizenship status of their customers and directs regulators to look for evidence of accounts or loans held by individuals without legal status. However, the executive order stops short of requiring banks to collect citizenship data, a demand that has faced significant pushback from the banking sector.
Historically, under the Patriot Act, banks have been permitted to share information with one another regarding suspected money laundering and fraud as part of efforts to combat terrorism. The recent actions from the Treasury expand this framework in two key areas. Banks can now share information more freely and in real-time, enhancing their ability to identify potential risks.
The Trump administration has also created a range of justifications for banks to share such information, including signs traditionally associated with immigration status. For instance, individuals using an Individual Taxpayer Identification Number (ITIN), which is commonly utilized by undocumented immigrants to secure employment, are now flagged as potential risks.
Bessent reiterated that the goal is not for banks to become immigration enforcement agencies. He noted, “We are asking banks to do what they do best: know their customers, identify risks, recognize suspicious patterns, and report illegal activity when they see it.” However, many bankers remain hesitant about this directive, fearing it could turn them into de facto immigration officials despite the administration’s reassurances. Collecting citizenship data would require substantial resources and create extensive paperwork, which would complicate existing banking operations.
As part of a broader initiative, the administration announced last week that it will expand the circumstances under which banks must file suspicious activity reports (SARs) to include indications of potentially undocumented workers. Nicholas Anthony, a regulatory expert at the Cato Institute, commented that while the administration maintains it does not want banks to act as immigration enforcers, the guidelines are moving dangerously close to that line.
Critics have previously warned that requiring banks to collect citizenship information could effectively purge undocumented immigrants from the financial system, thereby increasing the number of unbanked individuals in the country. Additionally, the administration has taken measures to limit undocumented workers’ access to the financial system. Last November, for example, the Treasury reclassified certain refundable tax credits as “federal public benefits,” affecting the eligibility of immigrant taxpayers who have complied with tax obligations.
