On May 19, 2026, President Trump signed an Executive Order directing the Secretary of the Treasury to issue a formal advisory to financial institutions identifying indicators of payroll tax evasion, off-the-books wage payments, labor trafficking, and the use of Individual Taxpayer Identification Numbers (ITINs) to open accounts without verified legal presence. The Order, titled Restoring Integrity to America's Financial System, signals a broader federal initiative to align anti-money laundering supervision with payroll tax enforcement and immigration-related verification concerns.
The Executive Order also instructs the Treasury Department, in consultation with federal financial regulators, to propose amendments to Bank Secrecy Act (BSA) regulations that would strengthen customer due diligence requirements for covered financial institutions. While the precise contours of those amendments will be developed through the rulemaking process, the Order's directives suggest that regulators will expect financial institutions to enhance the rigor with which they identify, verify, and monitor account holders, particularly in higher-risk contexts involving cash-intensive employers and accounts opened using ITINs.
For banks, credit unions, and money services businesses, the practical implications are significant. Institutions should anticipate enhanced know-your-customer (KYC) obligations, expanded suspicious activity monitoring keyed to the forthcoming Treasury advisory, and potential reexamination of account-opening practices involving ITIN holders. Compliance programs may need to be updated to reflect new red-flag typologies, with particular attention to transaction patterns consistent with off-the-books payroll, structuring, and labor trafficking indicators.
Employers, especially those in industries with significant cash payroll exposure, should likewise prepare for heightened scrutiny. Financial institutions may impose additional documentation requirements at account opening and during periodic reviews, and may file suspicious activity reports based on payment patterns that suggest payroll tax avoidance. Employers should review wage payment practices, worker classification, and tax withholding controls in anticipation of downstream reporting and information-sharing between financial institutions and federal authorities.
The advisory and proposed BSA amendments have not yet been issued, and affected institutions and employers will have an opportunity to assess specific obligations once those measures are published. In the meantime, regulated entities should monitor Treasury guidance closely and consider proactive review of their BSA, KYC, and payroll compliance programs.
This update is provided for general informational purposes only and does not constitute legal advice. Clients facing questions about how these developments may affect their operations should seek tailored guidance from qualified counsel.