The Treasury Department issued fresh guidance on Friday that allows banks to rapidly share information about suspected customers and provides advisory guidance steering banks to flag signs that customers may lack legal immigration status. According to reports from The Associated Press, these changes are part of the administration's push to remove undocumented workers from the nation's banking system without explicitly mandating that banks do so. Treasury Secretary Scott Bessent emphasized that the information banks hold can help stop cartel financiers, disrupt money laundering networks, uncover labor exploitation, or protect taxpayers from fraud. Bessent's remarks came at a banking conference in Houston, where he stated that the advisory does not ask banks to become immigration officers, but asks them to do what they do best: know their customers, identify risk, recognize suspicious patterns, and report illicit activity when they see it.
Friday's actions widened the existing Patriot Act program on two fronts, as reported by The Associated Press. Banks can now share customer information in real time and more freely than before. The new guidance provides banks with a wider variety of reasons to share information, which now include flags historically tied to immigration status. One example cited is customers having an individual taxpayer identification number (ITIN), which are disproportionally used by undocumented immigrants when applying for work. The Treasury Department has also expanded the reasons why a bank might file a Suspicious Activity Report (SAR) to include potential undocumented workers, building on the millions of SARs banks already send to federal regulators under the Bank Secrecy Act. Last week, the Treasury Department expanded the reasons why a bank might file a SAR to include potential undocumented workers.
According to The Associated Press, banks have been wary about sharing customer information with the federal government as part of immigration enforcement. Nicholas Anthony from the libertarian-leaning Cato Institute noted that the administration is saying they don't want banks to be immigration officials, but are trying to get as close to the line as possible. Banks have never collected citizenship information on their customers, so any effort to do so would require a massive effort by banks and significant amounts of paperwork. Bessent told bankers that the new guidance is simply part of what the banking system needs to do as part of their routine operations, stating that it asks banks to do what they do best: know their customers, identify risk, recognize suspicious patterns, and report illicit activity when they see it.
The new guidance stems from an executive order signed in May by Trump that requires banks to take a closer look at the citizenship of their customers, as reported by The Associated Press. However, that executive order did not include an explicit mandate that banks collect citizenship information, which the industry for months lobbied against. Banks have long been able to share information about their customers with other banks under the Patriot Act program when they suspect money laundering or fraud, part of the post-9/11 effort to combat terrorism and other crimes. The White House framed the effort on the premise of combating fraud, but also said undocumented workers introduce risk to the overall financial system by taking out loans that could potentially never be repaid because the borrowers could be deported.
According to The Associated Press, immigration advocates have previously said any order that would order banks to collect citizenship information would likely result in undocumented immigrants moving out of the financial system, increasing the number of 'unbanked' individuals. The White House has taken other measures to discourage undocumented workers from using the financial system, including the Treasury's announcement in November that it would reclassify certain refundable tax credits as 'federal public benefits,' which bars some immigrant taxpayers from receiving them even if they file and pay taxes. One study by the left-leaning Urban Institute estimated that between 5,000 and 6,000 mortgages were issued to customers with ITINs, which would be a tiny fraction of the millions of mortgages written each year.
