Trending: American Banks Fight Back Against Rumored Citizenship Verification Order
Last week, reports emerged that the United States government could once again be bringing forth new legislation with a sizeable impact on the domestic banking sector, namely with respect to the regulatory compliance sphere. The Trump Administration is reportedly exploring the announcement of a possible executive order that would require U.S. banks to collect citizenship information from their customers for the first time ever – an effort that could help address two areas that remain at the forefront of the government’s docket as 2026 progresses: illicit finance and illegal immigration. The proposal – which is currently being evaluated by the U.S. Treasury Department – would represent a significant expansion of existing banking compliance requirements and could reshape the relationship between immigration enforcement and the American financial system. However, the rumored legislation is not without its antagonists, including the very firms who could be forced to comply with the actions if enacted.
American financial service providers already operate under arguably the strictest customer-identification regulations of any major country in the world, and for good reason. In spite of recent geopolitical conflict, the United States remains a hotbed of economic and technological development, education, and real estate, while boasting the highest nominal GDP in the world. These factors have contributed largely to a rapid rise in international migration into the U.S. over the past decade, with the U.S. population growing by nearly 1% between 2023 and 2024 alone – marking the fastest annual population growth seen in the country since 2001.2 These factors have also made the U.S. a prime target for illicit financial activity. With [licit] foreign direct investment (FDI) in the U.S. reaching a record $5.7 trillion by the end of 2024, an exorbitant amount of funds of illicit origins also continues to be interjected into the U.S. financial system through drug trafficking, fraud, cybercrime and corruption. These developments, as well as advancements in safeguards enacted by U.S. regulators stemming primarily from the U.S. Bank Secrecy Act and related anti-money-laundering rules that are enforced by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and are to be maintained by financial institutions, have placed a great onus on domestic banking enterprises to weed out suspicious and illicit activity, creating significant burdens (in the form of mounting operational expenses and penalties for non-compliance) for them in the process.
Under current “Know Your Customer” (KYC) framework, banks must collect identifying information – typically a client’s name, address, date of birth, and personal identification number(s) – when opening accounts. With this information in tow, banks will then verify the individual’s identity, check databases for sanctions/Politically Exposed Persons (PEPs), calculate risk profiles, and later conduct transaction monitoring and report potentially suspicious activity, all for the purpose of combatting money laundering, terrorist financing, and other illicit financial activity. However, during this information collection process, citizenship status is not currently a required field, and U.S. law does not prohibit banks from serving non-citizens who are legally present, or even undocumented immigrants. Because of this framework, millions of immigrants, including undocumented workers, currently have some degree of access to traditional banking services in the United States. That could all change in the coming months, however.
Under the potential policy change, banks would effectively be required to verify and record citizenship information for customers, with rumors also circulating that the U.S. government could require both new and existing bank customers to provide documentation proving their citizenship or immigration status – creating even more work for the covered firms. While the precise scope of the policy remains unclear, several potential outcomes have reportedly been discussed internally. Those being:
- Banks might simply collect citizenship data without restricting accounts.
- New accounts (only) could require proof of citizenship or lawful status.
- Existing customers might be required to provide additional documentation.
- In a stricter version, accounts belonging to individuals unable to provide proof could potentially face closure.
A key logistical issue with using a document such as a passport as the vehicle of choice remains that a significant portion of U.S. citizens do not actively hold a passport, which could complicate verification requirements, and this is another issue that is being weighed by the Treasury. Thus far however, government officials involved in the discussions have emphasized that no final decision has been made on the order, and the White House has publicly described reports of the policy as purely speculative until formally announced by the President himself.
The proposal does however appear to align with the government’s broader strategy to limit the ability of undocumented immigrants to live and work in the United States. By requiring citizenship documentation for bank accounts, the policy would assist in identifying undocumented individuals altogether, while limiting their ability to participate in the formal financial system. Supporters of the measure have argued that restricting access to banking services could discourage unauthorized immigration and prevent illegal employment or money flows tied to undocumented work. American banks however have questioned the legal basis for the proposal, and have already begun to lobby the Treasury to reject such a measure on the basis of increased financial burden.1 Domestic financial institutions already spend billions of dollars and countless hours of manpower on an annual basis to comply with anti-money-laundering rules and regulatory reporting requirements as they currently stand. Requiring banks to verify citizenship status – especially for thousands of existing customers depending on the size of the firm – would impose a massive new compliance obligation. This comes in addition to the potential loss in revenue caused by reduction in size of their client base. The banks have argued that a measure of this nature could push these individuals into alternative financial services such as check-cashing stores or informal money networks, which tend to operate with less regulatory oversight, creating even greater susceptibility for illicit financial activity.
Global RADAR will continue to provide updates on developments related to this legislation over the coming months.
Citations
- Tokar D, Andrews N. Trump administration considers action requiring banks to collect citizenship info. Wall Street Journal. February 24, 2026.
- Wilder K. U.S. population grows at fastest pace in more than two decades, driven by international migration. S. Census Bureau. December 19, 2024.