The Treasury Department announced significant changes on Friday aimed at involving the nation’s banking sector more deeply in President Donald Trump’s immigration enforcement efforts. The new measures include updated guidance allowing banks to share customer information more rapidly when suspicious activity is detected, along with an advisory directing financial institutions to watch for indicators that customers may lack legal immigration status.

These actions represent part of a broader administration strategy to push undocumented workers out of the U.S. banking system without explicitly requiring banks to verify immigration status. The approach has been carefully framed around combating fraud and criminal activity rather than immigration enforcement directly, a distinction Treasury officials have emphasized repeatedly.

Treasury Secretary Scott Bessent addressed the changes during a banking conference in Houston, emphasizing the law enforcement angle. “The information in your purview can help stop a cartel financier, disrupt a money laundering network, uncover labor exploitation, or protect taxpayers from fraud,” Bessent said in his prepared remarks.

The new guidelines stem from an executive order Trump signed in May requiring banks to examine customer citizenship more closely. That order directed bank regulators and government agencies to identify instances where people without legal status are opening accounts, obtaining loans, or securing credit cards. Notably absent from the order was any explicit mandate requiring banks to collect citizenship information, a potential requirement the banking industry spent months lobbying against.

The expanded information-sharing system builds on existing frameworks established under the Patriot Act following the September 11 attacks. Banks have long been able to exchange customer information with other financial institutions when money laundering or fraud is suspected as part of counter-terrorism and anti-crime measures.

Friday’s announcement expands that system in two key ways. First, banks can now share such information with one another in real time rather than through slower, more bureaucratic channels. Second, the range of acceptable reasons for sharing information has widened considerably to include flags historically associated with immigration status.

One prominent example involves customers using Individual Taxpayer Identification Numbers, or ITINs. These identification numbers are disproportionately used by undocumented immigrants when applying for employment, making them a potential indicator in the eyes of the administration.

Treasury Secretary Bessent sought to downplay concerns about the new guidance, characterizing it as simply an extension of banks’ normal operating procedures. “The advisory does not ask banks to become immigration officers,” Bessent told the banking audience. “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.”

Despite these assurances, the banking industry has expressed significant reservations about sharing customer information for immigration enforcement purposes. Financial institutions have never routinely collected citizenship data from customers, meaning any comprehensive effort would require massive organizational changes and substantial increases in paperwork and compliance costs.

Banks already file millions of Suspicious Activity Reports to federal regulators under the Bank Secrecy Act. Just last week, the Treasury Department expanded the criteria for filing these reports to include potential undocumented workers, adding another layer to banks’ compliance obligations.

Nicholas Anthony, who focuses on bank regulation issues at the libertarian-leaning Cato Institute, noted the administration’s careful positioning. “The administration is saying they don’t want banks to be immigration officials, but they are trying to get as close to the line as possible,” he said.

When Trump originally signed the executive order, the White House justified the initiative based on fraud prevention. Officials also argued that undocumented workers pose systemic risks to the financial system by potentially taking out loans they cannot repay if deported. However, quantifying this risk remains difficult since banks have not historically tracked customer citizenship status.

Research on the actual scope of this issue remains limited. One study by the left-leaning Urban Institute estimated that between 5,000 and 6,000 mortgages annually are issued to customers with ITINs. This represents a tiny fraction of the millions of mortgages written each year across the country.

Immigration advocacy groups have warned that any measures requiring banks to collect citizenship information would likely drive undocumented immigrants out of the formal financial system entirely. This would increase the population of “unbanked” individuals who operate outside traditional financial institutions, potentially creating different security and monitoring challenges.

The Treasury Department has pursued other complementary measures to discourage undocumented workers from participating in the financial system. Last November, Treasury announced it would reclassify certain refundable tax credits as “federal public benefits,” effectively barring some immigrant taxpayers from receiving them even if they file tax returns, pay taxes, and would otherwise qualify for the credits.

These interconnected policy changes represent a significant shift in how the federal government approaches immigration enforcement through financial regulation, testing the boundaries between traditional banking oversight and immigration control.