Treasury Cracks Down on Illegal Immigrant Labor via Banks
The Treasury Department is directing banks to flag suspicious accounts tied to payroll fraud involving unauthorized workers and report offending employers to immigration authorities.
A Treasury advisory reviewed by the outlet details specific warning signs of illegal employment operations and calls on banks to cooperate directly with federal immigration enforcement. The 12-page document was scheduled for publication Friday.
Banks have already identified serious problems. Financial institutions reported over 2.5 billion dollars in suspicious activity connected to payroll tax fraud schemes in 2025, the advisory disclosed.
The guidance focuses on payroll tax fraud operations run by complicit employers and labor brokers operating through shell companies. These schemes allow businesses to undercut legitimate American companies, suppress wages, facilitate identity theft targeting authorized workers including United States citizens, and steal millions in federal and state payroll tax revenue designated for government benefit programs, Treasury stated.
Executive Order Implementation
The advisory originates from Treasury’s Financial Crimes Enforcement Network and implements President Trump’s May 19 executive order enlisting banks in the administration’s campaign against employers and illegal immigrants exploiting the financial system.
The document reveals how employers across agriculture, construction, hospitality and domestic service sectors conceal their hiring of unauthorized workers and how illicit funds move through banking channels.
Drawing on Internal Revenue Service data, Treasury explained the operation begins when an employer contracts a labor broker who establishes a shell company under fabricated names such as ABC Construction or XYZ Logistics. The broker then opens bank accounts using foreign passports or Individual Taxpayer Identification Numbers, deposits checks for fictitious services, then withdraws cash or issues small checks to pay workers off the books while evading all payroll taxes.
Labor brokers typically retain between four and ten percent of the illegal proceeds, with identity theft serving as the foundation of the entire operation, according to Treasury.
Identity Theft Powers Schemes
Unauthorized workers purchase or steal Social Security numbers from citizens and legal residents to circumvent employment verification systems, the advisory states.
Treasury cited two Honduran nationals sentenced earlier this year for such a scheme. Iris Villafranca and Osman Donaldo Zapata operated a multi-year cash payroll racket that defrauded taxpayers of more than 38 million dollars, receiving sentences of 17 years and four years respectively.
Their shell companies deposited approximately 89 million dollars in checks from construction subcontractors, allowing contractors to compensate workers off the books, the Justice Department reported.
18 Red Flags for Banks
The advisory provides 18 red flags for financial institutions to monitor. These include self-described laborers opening Individual Taxpayer Identification Number accounts that receive large volumes of checks from multiple companies before making rapid cash withdrawals or writing numerous small checks. Also flagged are construction or staffing firms generating substantial revenue while reporting minimal payroll, and companies under two years old lacking any online presence that resemble shell entities.
Treasury instructed banks to file suspicious activity reports with the department when they detect problems and to inform Immigration and Customs Enforcement about employers hiring or exploiting unauthorized workers through ICE’s tip submission site.
The Financial Crimes Enforcement Network cautioned that no single red flag constitutes proof of wrongdoing and that customer personal characteristics do not automatically indicate risk—an acknowledgment of fair lending regulations when banks examine Individual Taxpayer Identification Number holders, a category that includes legal residents and other tax filers without Social Security numbers.
Regulatory Consequences
The Financial Crimes Enforcement Network is the specialized Treasury bureau responsible for tracking, deterring and investigating money laundering and other financial crimes through collection of data on cash transactions, suspicious activity and business ownership.
While not legally binding, disregarding its advisories can prove extremely damaging to a bank’s regulatory standing, potentially triggering reputation-damaging investigations and substantial penalties. Treasury imposed a record 80 million dollar civil fine on New York-based investment bank Canaccord Genuity in March for failing to monitor suspicious trading.
Border Security Offensive
The advisory represents the latest action in Trump’s immigration enforcement campaign. The President declared a national emergency at the southern border on the first day of his second term and directed agencies to block work permits for unauthorized immigrants. The Financial Crimes Enforcement Network issued an alert in November addressing cross-border money transfers linked to illegal immigration.
Treasury Secretary Scott Bessent emphasized the administration’s commitment in a statement, noting that President Trump has accomplished more than anyone in history to secure the nation’s borders, including efforts to safeguard the financial system.
With information from New York Post
