On June 5, FinCEN, the FDIC, the OCC, and the NCUA, in coordination with the IRS, jointly issued an advisory urging financial institutions, particularly banks, to monitor for fraud schemes and other suspicious or potentially criminal activity involving the unlawful employment of “illegal aliens” and related risks to the “integrity” of the U.S. financial system. The agencies issued the advisory pursuant to Executive Order 14406, “Restoring Integrity to America’s Financial System,” which directed Treasury to address risks tied to use of the U.S. financial system by non-work-authorized populations and their employers (previously covered by InfoBytes here). The advisory states that these schemes can distort competition and wages, facilitate identity theft, and divert federal and state payroll tax revenue from government benefit programs.

According to FinCEN, financial institutions reported more than $2.5 billion in suspicious activity associated with payroll tax fraud schemes in 2025. The advisory encourages banks to evaluate, as part of risk-based customer due diligence, whether a customer’s use of an ITIN instead of a Social Security number or valid employment authorization document is relevant to the customer’s risk profile. The advisory enumerates 18 red flags, including mismatched Social Security numbers, recurring check deposits and structured cash withdrawals by customers in certain industries, use of commercial mail receiving agencies instead of business addresses, limited payroll activity despite significant business operations, and indicators of shell companies, but states that no single red flag is determinative.