Bank 'Red Flags'
FinCEN warns banks of 'red flags' for services to customers residing in the US illegally
Anonymous
The US Treasury's financial crime unit has put banks on alert about customers living in the country illegally, issuing a formal advisory with 18 specific "red flags" to watch for. The move, issued by the Financial Crimes Enforcement Network — known as FinCEN — follows an executive order President Trump signed on May 19 titled "Restoring Integrity to America's Financial System," according to US Treasury.
The advisory, co-issued with the FDIC, OCC, and NCUA, points to schemes like payroll tax fraud, identity theft, and money laundering tied to unauthorized workers. One cited case involved a $38 million "off-the-books" payroll scheme. The move is softer than expected — earlier White House plans would have made citizenship verification mandatory for all bank customers, American Banker reported.
Trump's Executive Order Stops Short of Mandatory ID Checks
In February 2026, the Trump administration floated plans to require all bank customers to show a US passport or birth certificate to open an account. The banking industry pushed back hard. Rob Nichols, head of the American Bankers Association, warned the plan would "misuse know-your-customer rules" built to stop crime, not enforce immigration law, according to American Banker. Passport ownership rates fall to 37% or lower in 10 states that voted for Trump — a stat banks used to lobby against the idea.
The White House backed down. Instead of mandatory checks, Trump signed EO 14406 on May 19. The order tells banks to use a "risk-based" approach. That means watching for suspicious patterns rather than demanding documents from every customer. Treasury Secretary Scott Bessent said the goal is to stop the theft of "billions of dollars from hardworking American taxpayers," according to First Coast News.
18 Red Flags Banks Must Now Watch For
FinCEN's advisory lists 18 specific warning signs. They include repetitive cash withdrawals in round numbers, wage payments that don't match tax records, and accounts that receive large payroll deposits but show no other normal spending. The use of an Individual Taxpayer Identification Number — an ITIN, which is a tax ID for people who can't get a Social Security number — is now listed as a "relevant risk factor," according to MyNorthwest.
Critics say treating ITINs as suspicious is a major problem. Many legal residents, visa holders, and small business owners use ITINs to pay taxes. The National Consumer Law Center warned the advisory could push millions of people to keep cash "under the mattress," making the financial system harder to track — not easier, according to Local Memphis.
Banks Face New Costs and Legal Risks Under the Rules
Even though mandatory ID checks were dropped, banks still face major new costs. Analysts at FTI Consulting said adding citizenship risk into existing compliance systems is "very complicated" with "knock-on effects" across bank technology, according to American Banker. Law firms Mayer Brown and Debevoise also flagged a structural concern: labeling unauthorized immigrants as high-risk borrowers — partly because they could be deported — creates a new kind of lending liability.
The Consumer Financial Protection Bureau is expected to clarify that deportation risk is a valid reason to deny mortgages, auto loans, and credit cards. That could effectively freeze an estimated 11 million unauthorized immigrants out of the formal credit market, according to Fox 61.
Critics Say the Policy Will Destabilize, Not Protect, the Financial System
Advocacy groups argue the advisory does the opposite of what it claims. The National Consumer Law Center's Diane Thompson called the push an attempt to "weaponize the financial system" that would "radically destabilize" US banking. When millions of people lose access to bank accounts, their money moves into untraceable cash markets — which are far harder for law enforcement to monitor, according to News10.
The administration frames it differently. The White House cited $312 billion allegedly laundered through US accounts by foreign networks as justification for the crackdown. For now, the real impact hinges on how aggressively bank regulators like the OCC choose to audit whether banks are acting on the 18 red flags, legal analysts told NH Register.
Sentiment
NeutralNEGATIVENEUTRALPOSITIVE
Publishers
8
Articles
7
Reach
8
A
AnonymousAuthor
