Trump tightens banking oversight on immigration, orders review of customers' citizenship
A new executive order instructs regulators and financial institutions to identify signs of risk linked to people without legal status. However, the White House backed off a broader proposal that would have required the collection of immigration information on all bank customers.
People use ATMs at a Bank of America branch.
President Donald Trump signed a new executive order instructing banks and federal regulators to more rigorously review the citizenship and status of certain customers, in a new move by the administration to tighten immigration enforcement and expand oversight of the U.S. financial system. The information was initially reported by the AP and shared by various national media outlets.
The order directs federal agencies and regulatory bodies to identify signs that people without legal status could be opening bank accounts, applying for loans or accessing credit cards. According to the White House, the measure seeks to reduce financial risks associated with possible deportations that could affect certain customers' ability to pay.
Avoiding financial risks associated with deportation
The administration argued that it will not allow risks to the banking system "posed by the extension of credit or financial services to the inadmissible and removable alien population."
However, the final version of the order was less broad than expected. Previous reports indicated that the White House was considering obligating banks to collect citizenship or immigration status information on all their customers. That proposal generated a strong reaction from the financial sector.
According to reports by Reuters and other media outlets, banking entities warned that such an obligation would imply high operating costs, greater bureaucratic burden and possible legal risks. In the end, the White House opted to issue regulatory guidance and reinforce existing oversight criteria, rather than impose mandatory verification.
Mortgages without tax backstops
One of the points of debate revolves around the use of so-called ITINs (Individual Tax Identification Numbers), frequently employed by workers who do not have Social Security numbers. A study by the Urban Institute estimated that between 5,000 and 6,000 mortgages were granted to borrowers using that tax mechanism.
However, the research itself points out that banks historically have shown caution in granting loans under that scheme.
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Immigrant advocates and civic organizations have warned that a policy of increased scrutiny could drive thousands of people out of the formal financial system and increase the unbanked population.
The move is in addition to other recent actions by the Trump administration related to immigration and access to financial benefits, including modifications on certain tax credits and programs that could affect beneficiaries of immigration programs such as DACA and Temporary Protected Status.
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