Treasury pushes tighter rules to curb illegal payroll schemes by undocumented workers

During a remarks session with Arizona bankers, Treasury Secretary Scott Bessent announced that the Trump administration is rapidly intensifying efforts to block criminal networks, cartels and undocumented immigrants from exploiting the U.S. financial system for payroll, tax evasion and other fraudulent activities. He cited the May-signed executive order titled “Restoring Integrity to America’s Financial System,” which directs Treasury, the Federal Reserve, the Office of the Comptroller of the Currency, the FDIC, the National Credit Union Administration and the Consumer Financial Protection Bureau to tighten customer-identification and due-diligence standards and to reassess credit risk for borrowers lacking work authorization.

Guidance from the Financial Crimes Enforcement Network and an OCC advisory on lending to unauthorized workers have already been released, and the Treasury has satisfied the first set of deadlines. Bessent stressed that banks are expected to identify and report suspicious patterns without shouldering border-enforcement responsibilities, and he pledged to provide better tools and listen more closely to community banks. Legal and tax experts caution that the order’s effect will hinge on how future regulations are drafted, noting it stops short of requiring citizenship verification for all customers but may tighten know-your-customer requirements. Upcoming milestones include credit-risk guidance by July 20, a CFPB ability-to-repay clarification, a customer-due-diligence proposal by August 17, and a broader identification rule by November 16.