Executive Order on Banking and Citizenship
President Donald Trump signed an executive order on Tuesday mandating banks to examine the citizenship status of their customers more closely. This step is part of the administration’s efforts to tighten actions against individuals residing in the country without authorization.
The order requires bank regulators and government departments to investigate if individuals lacking legal status are opening accounts or obtaining loans or credit cards. Despite initial expectations that the order would compel banks to collect information about customers’ citizenship, it is less stringent than anticipated.
The White House argues that banks might face credit risks if a client is deported and unable to repay a loan. The administration emphasized it would not “allow risks to our financial system from extending credit or financial services to inadmissible and deportable foreigners.” Currently, banks do not collect data on the citizenship or immigration status of their customers, so there are no reliable public statistics on the risks posed by these customers to the financial system.
A study by the left-leaning Urban Institute estimated that between 5,000 and 6,000 mortgages were issued to customers with Individual Taxpayer Identification Numbers (ITIN). These ITINs are commonly used by undocumented workers instead of a Social Security number. The institute noted that banks are hesitant to lend to individuals with ITINs. Furthermore, major mortgage companies like Fannie Mae and Freddie Mac are also cautious about securing mortgages for borrowers with ITINs, reducing the likelihood of these individuals obtaining a mortgage.
The White House had signaled plans for an executive order concerning how banks manage clients without legal authorization for weeks. Last month, Treasury Secretary Scott Bessent stated there should be “stricter rules” for opening bank accounts. Bessent questioned, “Why can foreigners of unknown nationality come and open a bank account?” He emphasized the importance of banks knowing their customers, asking, “How do you know your customer if you do not know their legal status, whether they are a U.S. citizen or a green card holder?”
In response, the banking industry has been lobbying strongly for months to prevent the White House from issuing a mandatory order to collect their customers’ citizenship status, arguing it would be expensive and require extensive paperwork. With the order only providing a recommendation and not an obligation, banks appear to have persuaded the White House.
Immigrant rights advocates have stated that any order requiring banks to collect citizenship information could drive undocumented immigrants out of the financial system. The White House has made other moves to deter unauthorized workers from using the financial system. In 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 file tax returns, pay taxes, and meet other criteria.
Tax experts indicated that immigrants brought to the United States illegally as children by their parents — known as Deferred Action for Childhood Arrivals (DACA) recipients, and those with Temporary Protected Status, would be significantly affected by the planned change.