Since banks have generally not collected citizenship or immigration-status information from customers, the executive order represents a new direction for how financial institutions can assess risk, according to a White House framing that ties the policy to deportation consequences.
The order, signed Tuesday, directs bank regulators and government departments to look for signs that people without legal status are opening accounts or getting loans or credit cards. The White House said the rationale is financial risk—framing the extension of credit to people it described as “inadmissible and removable” as something it would not “permit” because of potential harm to the financial system. The Associated Press reported that the order stopped short of earlier expectations that it would make collection of citizenship information mandatory.
Earlier reports, the AP said, indicated the White House was drafting an executive order that would require banks to collect customers’ citizenship information. Instead, the signed order provides guidance rather than a strict mandate, and the AP report said banking-industry lobbying helped push the White House toward a less aggressive approach. Industry officials had argued that mandatory collection would be expensive and require extensive paperwork.
The policy arrives amid a “know your customer” compliance environment that does not require banks to gather citizenship or immigration-status data, the AP reported. The AP also said there are no reliable public figures on how much risk customers without legal status pose to the financial system under such a framework, in part because banks have not previously collected that information in a systematic way.
Treasury Secretary Scott Bessent, speaking earlier, had pressed for “stricter rules” for how banks open accounts. The AP reported that Bessent asked why the “unknown foreign nationals” could open bank accounts and questioned how banks can know whether people are U.S. citizens or green card holders when they do not know whether someone has legal or illegal status.
The AP report cited an Urban Institute study estimating that between 5,000 and 6,000 mortgages were issued to customers using Individual Taxpayer Identification Numbers, or ITINs. The study, the AP said, described that banks were highly reluctant to lend to people with ITINs, and that Fannie Mae and Freddie Mac are also generally reluctant to insure mortgages for borrowers with an ITIN—factors that make it less likely for ITIN holders to obtain a mortgage.
The White House’s approach had been signaled for weeks, the AP said, including statements about tightening bank account rules tied to immigration status. The administration has also pursued other measures that it says discourage undocumented workers from using financial services, including a Treasury announcement last November that would reclassify certain refundable tax credits as “federal public benefits.” That change, according to the AP report, bars some immigrant taxpayers from receiving the credits even if they file and pay taxes and otherwise qualify.
Tax experts told the AP that groups such as Deferred Action for Childhood Arrivals recipients and people with Temporary Protected Status would likely be affected by the planned change that Treasury announced. The AP also reported that immigration advocates previously argued that an order requiring banks to collect citizenship information would prompt some undocumented immigrants to move out of the financial system, potentially increasing the number of “unbanked” people.
As banks adapt to the executive order’s guidance, the policy also raises questions about how regulators plan to identify indications of legal status among customers who have not been required to provide citizenship-related information. The order’s emphasis on credit risk and deportation consequences, as described by the White House, sets up a new compliance challenge for financial institutions seeking to follow the administration’s approach while weighing costs and potential impacts on access to banking services.