Financial institutions should prepare for increased regulatory attention to customer due diligence, customer identification, and consumer credit risk involving non-work authorized individuals and customers whose lawful immigration or employment authorization status cannot be verified.

On May 19, 2026, the Administration issued an Executive Order titled “Restoring Integrity to America’s Financial System” (available here). The Order directs the U.S. Department of the Treasury, federal banking regulators, and the Consumer Financial Protection Bureau (“CFPB”) to consider new guidance and regulatory amendments addressing financial activity associated with unauthorized employment, cross-border payments, identity documentation, and credit underwriting risks.

The Order does not appear to immediately change existing law or current Bank Secretary Act (“BSA”) regulations. However, it sets in motion a series of agency actions that could materially affect Anti-Money Laundering (“AML”), Know Your Customer (“KYC”), Customer Identification Program (“CIP”), and consumer lending compliance expectations for banks and other covered financial institutions.

Treasury Advisory Expected Within 60 Days

The Order directs Treasury to issue guidance identifying suspicious activity “red flags” related to unauthorized employment and cross-border financial activity. Areas specifically identified include:

• payroll tax evasion involving unauthorized workers;
• concealed ownership or payroll structures using nominee accounts, shell companies, funnel accounts, or foreign identity documents;
• off-the-books wage payments through unregistered money services businesses, third-party processors, or peer-to-peer payment platforms;
• structuring activity involving repetitive sub-threshold cash transactions tied to payroll cycles;
• labor trafficking indicators, including commingling of proceeds with legitimate revenue or foreign transfers; and
• risks associated with Individual Taxpayer Identification Number (“ITIN”) -based accounts or credit activity where lawful immigration or work authorization status is not verified.

Financial institutions should expect these red flags to influence future supervisory expectations for transaction monitoring, suspicious activity reporting, and enhanced due diligence.

Proposed Expansion of Customer Due Diligence Requirements

Within 90 days, Treasury, in consultation with federal banking regulators, must propose amendments to BSA regulations designed to strengthen risk-based customer due diligence requirements.

These amendments may require covered financial institutions to collect and verify sufficient customer and beneficial ownership information to identify nominal and beneficial account owners and assess risks involving illicit finance, sanctions evasion, fraud, or other unlawful activity. Institutions may also be expected to obtain additional information where risk indicators or supervisory concerns raise material compliance issues.

Most notably, the Order directs Treasury to consider enhanced immigration-related due diligence. This could include requesting information relating to lawful immigration status and employment authorization where relevant to assessing risks involving fraud, identity misrepresentation, sanctions evasion, or other illicit financial activity.

CIP Rules and Foreign Consular Identification Cards

The Order also directs Treasury and federal banking regulators to consider amendments to customer identification program regulations within 180 days.

These potential changes would address risks associated with the use of foreign consular identification cards in the U.S. financial system. Any regulatory proposal in this area could affect onboarding procedures, acceptable identification policies, exception handling, and risk-rating practices for non-U.S. citizen customers.

Consumer Lending and Credit Risk Guidance

The Order also addresses consumer lending. Within 60 days, the CFPB must consider clarifying that potential deportation or loss of wages may affect a borrower’s ability to repay under existing Regulation Z standards.

Separately, federal banking regulators must issue guidance regarding credit risks associated with lending to individuals who lack work authorization. For lenders, this may affect underwriting procedures, documentation standards, fair lending reviews, and credit risk governance.

Key Takeaways for Financial Institutions

• Evaluate whether current AML/KYC policies adequately address onboarding, monitoring, and risk-rating of non-U.S. citizen customers, particularly where immigration or employment authorization status is unclear.
• Monitor forthcoming Treasury, CFPB, and banking agency guidance closely because the Order directs agencies to act on an accelerated timeline.
• Review procedures for ITIN-based accounts, foreign identification documents, beneficial ownership verification, payroll-related activity, and high-risk transaction monitoring.
• Coordinate among compliance, legal, lending, fair banking, and operations teams before making programmatic changes.
• Calibrate any response to existing BSA/AML obligations, consumer protection requirements, fair lending considerations, and anti-discrimination laws.

What to Watch Next

The Executive Order establishes several near-term agency action deadlines that could affect financial institution compliance programs. Within 60 days, Treasury is expected to issue a suspicious activity red-flag advisory, which may influence transaction monitoring, SAR escalation, and enhanced due diligence expectations. During that same 60-day period, the CFPB is directed to consider ability-to-repay clarification, while federal banking agencies are expected to issue credit risk guidance; these actions could affect consumer underwriting, credit risk governance, and fair lending review.

Within 90 days, Treasury, in consultation with federal banking regulators, is expected to propose amendments to BSA customer due diligence regulations. These proposed amendments could have implications for customer risk-rating, beneficial ownership verification, and immigration-related due diligence. Within 180 days, Treasury and the federal banking regulators are also directed to consider CIP amendments addressing the use of foreign consular identification cards, which could affect onboarding procedures, acceptable-ID policies, exception handling, and documentation standards.

Butler Snow Summer Associate Hank Pearson contributed to this article.