New Executive Order Targets Non-Citizen Banking Activities, Focuses on Red Flags

Non-citizens in the U.S. will face greater scrutiny on their banking activities following an executive order by President Donald Trump on Tuesday, but the directive was less extensive than a previous ‌proposal floated by Treasury ⁠requiring banks ⁠to collect clients' citizenship information.

The Trump administration has proposed a number of policies that have sideswiped banks, including the idea floated earlier in the year to collect citizenship data.

In January, Trump also blindsided the industry by calling for credit card providers to cap interest rates in a bid to address cost-of-living concerns, and he has targeted Wall Street banks for discriminating against conservatives, a claim they deny.

The latest order, issued Tuesday, however, fell short of calling for citizenship data. Instead it directs the Treasury secretary to issue an advisory to banks to identify red ⁠flags tied 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 verified legal presence in ⁠the U.S.

The proposal was seen as an example of the administration listening to industry, an executive in a large bank that asked for anonymity said, adding it showed the administration was open to change.

Senior industry executives had warned that requiring banks to collect data on their customers' citizenship or immigration status would be costly and disruptive.

"Obviously, the administration wants greater controls on immigration, but the bank regulators have always wanted as many financial transactions to go through the traditional financial systems," said Ed Mills, a Washington policy analyst with Raymond James.

"This would have removed a lot of individuals from the financial system, which ‌could create a national security risk as well," he added. Banks considered that checking the immigration status and citizenship of all current clients would be very burdensome and nearly impossible, Reuters reported last month.

Trade groups have explained that such an ⁠order could lead to debanking of millions of customers and reduce financial access to Americans.

Among the examples of red flags cited by the latest order are accounts in the names of shell companies and use of specific platforms to disguise wage payments, and repetitive cash withdrawals. The use of Individual Taxpayer Identification Numbers (ITIN) should also be flagged when not accompanied by a Social Security number or a work visa.

The White House also said Treasury and regulators should propose changes to the Bank Secrecy Act to make it easier to obtain information about clients, singling out documents issued by foreign consulates as risky.

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