WASHINGTON — The Financial Crimes Enforcement Network, a bureau of the Treasury Department, issued an advisory directing financial institutions to monitor and report payroll fraud schemes connected to unauthorized workers. The advisory instructs banks to oversee transactions for identity theft, payroll tax fraud, and money laundering associated with the employment of unauthorized individuals.
The advisory lists 18 specific indicators for financial institutions to monitor concerning potential unauthorized worker employment schemes. Financial institutions are also instructed to file suspicious activity reports and submit tips regarding exploitative hiring to Immigration and Customs Enforcement.
Treasury Secretary Scott Bessent said, "Schemes to pay unlawful workers often rely upon access to the U.S. financial system, including U.S. banks."
Payroll fraud schemes often involve employers using shell companies and labor brokers who open accounts with foreign passports or Individual Taxpayer Identification Numbers. Labor brokers involved in these schemes retain between 4 percent and 10 percent of illicit proceeds, and identity theft is used to bypass employment verification requirements.
In 2025, banks reported more than $2.5 billion in suspicious activity related to payroll tax-fraud schemes. For instance, Iris Villafranca and Osman Donaldo Zapata were sentenced for operating a cash-payroll scheme that resulted in over $38 million in unpaid federal and state payroll taxes. Villafranca received a 17-year prison sentence, while Zapata received a four-year sentence. Shell companies linked to Villafranca and Zapata deposited approximately $89 million in checks from construction subcontractors.
President Donald Trump signed an executive order in May, directing financial institutions to examine customer citizenship information. It guides bank regulators and government agencies to identify individuals without legal status who open accounts, obtain loans, or apply for credit cards. It provides guidance rather than mandating that banks collect citizenship data from customers. The banking sector lobbied against mandatory citizenship information collection, citing financial and administrative costs. U.S. banks have not historically collected customer citizenship or immigration status information, and there is no public data on associated financial risks. The Financial Crimes Enforcement Network cautioned that customer personal characteristics do not automatically indicate legal status risk, in accordance with fair-lending regulations. Bessent said, "This administration will not allow illegal aliens to abuse financial institutions to steal billions of dollars from hardworking American taxpayers."