Trump Administration Implements New Measures for Customer Citizenship Verification in Banking
WASHINGTON—In a significant move to tighten regulations surrounding the banking sector, President Donald Trump signed an executive order on Tuesday mandating that banks verify the citizenship status of their customers. This initiative is part of the administration’s broader strategy to combat illegal immigration.
The executive order directs banking regulators and other government officials to monitor for indications that individuals without legal status are opening accounts or securing loans and credit cards. However, contrary to earlier expectations of a more rigorous policy, the order is less demanding than anticipated. Initial reports hinted that the administration was formulating a directive that would necessitate banks to collect citizenship data from all customers.
In the order, the White House articulated a concern regarding the potential credit risk to banks if a customer were deported and unable to fulfill loan obligations. The administration emphasized its zero-tolerance stance towards risks posed to the financial system by the extension of credit and financial services to foreign nationals deemed “unacceptable and excludable.”
Currently, banks do not gather data on the nationality or immigration status of their clientele. As a result, there is a lack of official statistics regarding the financial risks posed by customers without legal status. Left-leaning research organizations estimate that between 5,000 and 6,000 mortgages have been issued to clients with Individual Taxpayer Identification Numbers (ITINs), which are primarily used by undocumented workers as substitutes for Social Security numbers. The reluctance of banks to lend to individuals with ITINs remains a major obstacle, compounded by Fannie Mae and Freddie Mac’s general hesitance to back mortgages for this demographic.
For several weeks, the White House signaled its intent to introduce an executive order regulating how banks interact with customers without legal residency. Treasury Secretary Scott Bessent had previously insisted on the necessity of stricter rules for account openings, posing the rhetorical question, “Why would an unknown foreigner be able to come and open an account?” He highlighted the importance of banks understanding their customers and the implications of failing to ascertain whether they are legal residents or U.S. citizens.
Despite the administration’s push for such regulations, the banking industry has lobbied heavily against strict citizenship verification protocols, arguing that they would lead to increased costs and require excessive paperwork. This lobbying appears to have impacted the final directive, which offers guidance rather than mandates for banks.
Immigration advocates have warned that enforcing stricter citizenship requirements could lead to a significant reduction of illegal immigrants within the financial system and exacerbate the unbanked population. In a further effort to curb benefits extended to undocumented workers, the White House announced last November that certain refundable tax credits would be reclassified as “federal public benefits.” Such a change would result in some immigrant taxpayers being ineligible to receive these credits, despite having filed taxes and being eligible.
Tax experts believe that the upcoming changes are likely to have a disproportionately adverse impact on immigrants who were brought to the U.S. illegally as children and are recipients of Deferred Action for Childhood Arrivals (DACA), as well as those with Temporary Protected Status.
