The Treasury Department is taking steps to address illegal immigrant labor, urging banks to report accounts associated with payroll fraud schemes.
An advisory from the department highlights concerns over illegal employment practices and suggests that banks notify Immigration and Customs Enforcement (ICE) about employers exploiting unauthorized workers.
In fact, banks are already detecting issues; they reported over $2.5 billion in suspicious activity due to payroll tax fraud in 2025, according to an advisory set to be released soon.
This 12-page document centers on schemes where employers and labor brokers work together through shell companies.
According to the Treasury Department, these schemes give employers an unfair edge over legitimate businesses, allowing them to lower wages, impersonate authorized workers, and steal substantial amounts from federal and state payroll tax revenues intended for government services.
This recommendation follows President Trump’s executive order from May 19, which seeks to involve banks in combatting financial abuses linked to illegal immigration.
The advisory reveals that leaders in agriculture, construction, hospitality, and domestic services often conceal the hiring of unauthorized workers and how money flows through banks in these operations.
The Treasury Department, referencing the IRS, pointed out that the trouble started when employers engaged labor brokers to create shell companies with fictitious names, like ABC Construction and XYZ Logistics. The brokers then opened bank accounts using foreign passports or tax ID numbers, depositing checks for non-existent services, and subsequently cashing or redistributing those funds to pay workers off the books, evading payroll taxes.
Brokers reportedly take 4% to 10% of the illegal earnings, and identity theft is a key component of these operations.
The advisory mentions that unauthorized workers are acquiring or stealing Social Security numbers from citizens and lawful residents to bypass employment checks.
This year, two individuals from Honduras were convicted for similar actions, having run a cash payroll fraud scheme that cost taxpayers over $38 million. They received prison sentences of 17 and 4 years, respectively.
The shell entity was said to have deposited checks amounting to around $89 million from construction subcontractors, with workers being compelled to accept payments off the books.
The advisory outlines 18 warning signs that banks should be vigilant about.
These could include self-identified “workers” opening Individual Taxpayer Identification Number (ITIN) accounts, cashing large checks from multiple companies, and displaying suspicious financial patterns. Construction and staffing firms showing increased profits yet limited payments also raise concerns, particularly if they are fairly new with minimal online presence.
The Treasury is urging banks to submit suspicious activity reports if they discover any issues and to alert authorities about employers who hire or exploit unauthorized workers. There’s encouragement for financial institutions to maintain vigilance.
The Financial Crimes Enforcement Network (FinCEN) clarified that one red flag alone doesn’t imply wrongdoing and that a customer’s attributes don’t automatically signify a risk. This is a nod to fair lending standards that regulate banks’ evaluations of ITIN holders, which include legal residents and taxpayers without Social Security numbers.
FinCEN, a specialized agency within the Treasury, monitors and investigates money laundering and other financial crimes by gathering data on transactions and suspicious activities.
While its recommendations aren’t legally enforceable, neglecting them could jeopardize a bank’s regulatory standing and lead to reputational harm, investigations, and penalties.
The advisory reflects a broader effort by the administration as President Trump intensifies his stance on immigration.
In March, the Treasury imposed a record $80 million fine on Canaccord Genuity, an investment bank based in New York, for inadequate monitoring of suspicious transactions.
Trump has claimed significant achievements in safeguarding the nation’s borders, emphasizing that part of this includes securing the financial system against misuse by unauthorized immigrants.
“This administration will not tolerate illegal aliens exploiting financial institutions to swindle hard-working American taxpayers,” Treasury Secretary Scott Bessent stated.
