New Executive Order Calls for Stricter Vetting by Financial Institutions

Quick Hits

• On May 19, 2026, President Trump issued an executive order calling for stricter due diligence requirements when financial institutions vet customer applications.
• The executive order requires banks and financial services companies to treat customers’ immigration status as a factor in evaluating potential financial risk.
• The executive order’s stated purpose is to “safeguard [the] financial system from illicit use[s],” such as unwithheld payroll taxes, money laundering, terrorism financing, and labor trafficking.

The executive order directs the secretary of the treasury and federal regulators to propose changes to Bank Secrecy Act regulations to strengthen due diligence requirements for financial institutions. A White House fact sheet explains, “Gaps in customer identification practices have allowed terrorists, drug traffickers, money launderers, and other criminal networks to exploit U.S. financial institutions to move illicit funds and evade law enforcement.”

The executive order describes red flags associated with suspicious financial activity, including:

• “evidentiary patterns of payroll tax evasion by employers or labor brokers,” including failures to withhold or remit federal taxes for non–work-authorized individuals;
• the use of unregistered third-party payment processors or digital platforms to “facilitate ‘off-the-books’ wage payments intended to bypass Bank Secrecy Act reporting thresholds or tax obligations”;
• the use of certain “foreign-identity documents, nominee accounts, shell companies, or complex ‘funnel’ structures designed to obfuscate the identity of the ultimate beneficial owners or conceal the true nature of payroll disbursements”;
• “patterns of repetitive, sub-threshold cash withdrawals or deposits that correlate with payroll cycles conducted outside of regulated payroll processing systems”;
• “financial activity indicative of labor trafficking or forced labor … where proceeds are commingled with legitimate business revenue or transferred to foreign jurisdictions; and
• “the use of an individual taxpayer identification number (ITIN) to obtain credit products or open depository accounts where the applicant lacks verified lawful immigration status.”

The executive order clarifies that an ITIN “facilitates tax compliance,” but its use in lieu of a Social Security number or valid work-authorized visa “may be identified as a risk factor requiring enhanced due diligence to ensure the account is not being utilized to facilitate the unlawful employment of unauthorized aliens.”

The executive order could make it more difficult for employees who are not U.S. citizens to open bank accounts, obtain credit, and access other financial services. It calls on federal regulators to issue guidance for banks and other financial institutions on managing the credit risks associated with extending loans and providing financial services to individuals without work authorization. It also directs the Consumer Financial Protection Bureau to consider changing regulations to clarify that potential deportation and loss of wages are factors that could affect a borrower’s ability to repay a loan.

Next Steps

The executive order could lead to new proposed rules from federal regulators in the upcoming months. Employers in the financial services industry may wish to evaluate their customer due diligence protocols to gauge whether any changes may be needed in the future. Current federal law does not require U.S. citizenship as a qualification for a car loan, mortgage, or credit card in the United States.

Ogletree Deakins’ Employment Tax Practice Group and Financial Services Industry Group will continue to monitor developments and will post updates on the Employment Tax and Immigration blogs as additional information becomes available.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.

Michael K. Mahoney is a shareholder in Ogletree Deakins’ Morristown office, and he is the chair of the firm’s Employment Tax Practice Group.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

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