US President Donald Trump on Tuesday signed a new executive order that tells banks and financial regulators to pay closer attention to the citizenship status of customers. The move is part of his administration’s wider crackdown on undocumented immigrants living in the United States.
The order asks government agencies and banking regulators to look for signs that people without legal immigration status may be opening bank accounts or applying for loans and credit cards. Still, the final order stopped short of forcing banks to collect citizenship details from every customer.
Earlier reports had suggested the White House was considering a much stricter rule that would have made it mandatory for banks to gather citizenship information from customers. That proposal had worried the banking industry for months.
The current order focuses on financial crimes such as payroll tax evasion, hiding the real owners of bank accounts, and labor trafficking. The White House said the administration wants banks and financial institutions to be more alert to suspicious financial activity.
Trump signs order asking banks to check customers’ citizenship status
In the executive order, the White House argued that banks could face financial problems if undocumented immigrants who have taken loans are deported and can no longer repay them.
The administration said it would not “permit risks to our financial system posed by the extension of credit or financial services to the inadmissible and removable alien population,” according to AP.
However, there is very little public data showing how much financial risk undocumented immigrants actually pose to banks. Notably, banks in the United States have never regularly collected information about customers’ citizenship or immigration status.
Changes proposed to banking rules
The executive order also asks the Treasury Secretary to suggest changes to rules under the Bank Secrecy Act.
According to the White House, the proposed changes would strengthen customer due diligence requirements. In simple terms, banks may be expected to do deeper checks on customers and gather extra information when necessary.
The administration said the goal is to give authorities stronger powers to obtain additional details if suspicious activity is detected.
Banks pushed back against stricter citizenship checks
The banking industry had been lobbying heavily against the tougher version of the executive order that was reportedly being discussed earlier.
Banks argued that collecting citizenship information from millions of customers would create huge amounts of paperwork and add major costs across the financial system.
Immigration advocates had also raised concerns. They warned that if banks were required to collect immigration or citizenship details, many undocumented immigrants could pull their money out of banks altogether. That, they said, could lead to a dramatic rise in the number of “unbanked” people who keep cash outside the formal financial system.
Mortgages for undocumented immigrants are already rare
A study by the Urban Institute estimated that between 5,000 and 6,000 mortgages were given to people using Individual Taxpayer Identification Numbers, also known as ITINs. These ITINs are often used by undocumented workers instead of Social Security numbers when filing taxes.
According to the AP, the study also found that banks are already very hesitant to lend money to people using ITINs. Mortgage giants Fannie Mae and Freddie Mac are also generally unwilling to back mortgages for ITIN borrowers. Because of that, it is already difficult for undocumented immigrants to get home loans in the US.