Noncitizens of the United States will face increased scrutiny of their banking operations following President Donald Trump’s executive order on Tuesday, May 19, although the directive was not as broad as the Treasury Department’s previous proposal to require banks to collect nationality information on their customers.
The Trump administration has proposed a number of policies that would hurt banks’ profits, including an idea floated earlier this year to collect citizenship data. President Trump also targeted Wall Street banks in January for blinding the industry and discriminating against conservatives by requiring credit card companies to cap interest rates to address cost-of-living concerns, allegations they deny.
The latest order stopped short of requiring citizenship data. Instead, it directs the Secretary of the Treasury to issue recommendations to banks to identify red flags related to payroll tax evasion, concealment of true account ownership, off-the-books wage payments, labor trafficking, and the use of individual taxpayer identification numbers to open accounts or obtain credit without a proven legal presence in the United States.
Industry executives have warned that requiring banks to collect data on customers’ nationality and immigration status would be costly and confusing.
“It’s clear that the administration wants to tighten immigration controls, but banking regulators always want as many financial transactions as possible to go through the traditional financial system,” said Ed Mills, Washington policy analyst at Raymond James. “This would exclude many individuals from the financial system and could also pose national security risks,” he added.
Reuters reported last month that banks considered it too burdensome and nearly impossible to verify the immigration status and citizenship of all their current customers. Industry groups say such an order could debank millions of customers and reduce financial access for Americans.
Examples of red flags cited in the latest order include accounts in shell companies, the use of certain platforms to disguise wage payments, and repeated cash withdrawals. Use of an Individual Taxpayer Identification Number (ITIN) should also be flagged if it is not accompanied by a social security number or work visa.
The White House also said the Treasury Department and regulators should propose changes to the Bank Secrecy Act to make it easier to obtain information about customers, and cited documents issued by foreign consulates as dangerous.
