Trump Orders Banks to Scrutinize Citizenship

President Donald Trump signed an executive order on Tuesday requiring banks to more closely examine the citizenship of their clients. This move is part of his administration’s push to crack down on people living in the country without authorization. The order requires banking regulators and government departments to search for signs that individuals lacking legal status are opening accounts or securing loans and credit cards.

While the order is a step in tightening controls, it is less stringent than banks initially expected. Prior reports suggested the White House was drafting an order that would mandate the collection of customer citizenship information. In the order, the White House highlights that banks could face credit risks if customers, once deported, are unable to repay loans. The White House stated it would not “allow risks to our financial system from extending credit or financial services to inadmissible alien populations subject to deportation.”

Banks have never collected citizenship or immigration status information from customers, making reliable public data on the financial risk posed by these clients non-existent. A study by the left-leaning Urban Institute estimated that between 5,000 and 6,000 mortgages were issued to customers using Taxpayer Identification Numbers (ITINs). These ITINs are often used by undocumented workers instead of Social Security Numbers. The institute noted that banks are hesitant to lend to ITIN holders. Mortgage companies Fannie Mae and Freddie Mac also typically avoid insuring mortgages for ITIN customers, further reducing the likelihood of such documents being accepted for a mortgage.

The White House had been signaling plans for executive action related to how banks handle clients without legal authorization in the country. Treasury Secretary Scott Bessent stated last month that stricter rules should exist for opening bank accounts. He questioned, “Why can nationals of unknown status come and open a bank account?” Bessent emphasized that bank executives should know their customers, asking, “So how do you know your customer if you don’t know their legal status or citizenship?”

The banking industry had aggressively lobbied for months to prevent the White House from issuing a mandatory executive order on collecting citizenship status, arguing it would be costly and involve significant paperwork. Since the order simply recommends rather than mandates action, banks appear to have swayed the White House’s decision.

Immigrant rights advocates have previously stated that any order requiring banks to collect citizenship information would likely lead unauthorized immigrants to exit the financial system. The White House has taken other steps to discourage unauthorized workers from using the financial system. Last November, the Treasury Department announced it would reclassify certain refundable tax credits as “federal public benefits,” preventing some immigrant taxpayers from receiving them, even if they submit their returns, pay taxes, and meet other requirements.

Tax experts noted the planned changes would significantly affect immigrants brought to the United States illegally by their parents as children, known as DACA recipients, and immigrants with Temporary Protected Status.