Joint Advisory On Non-Work-Authorized Populations And Their Employers And Risks To The Integrity Of The US Financial System

On May 19, 2026, the White House issued Executive Order 14406, Restoring Integrity to America’s Financial System, which requires the US Department of the Treasury to issue formal advisories to financial institutions regarding the risk associated with the exploitation of the US financial system by non-work-authorized populations and their employers.

The department’s Financial Crimes Enforcement Network (FinCEN), jointly with the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the National Credit Union Administration, issued an advisory on June 5, 2026, for banks to be vigilant against fraud schemes and other suspicious or potentially criminal activities involving the unlawful employment of illegal aliens and the associated risks to the integrity of the US financial system. According to the advisory, through these schemes, employers can gain an unfair advantage over legitimate US businesses; depress wages; facilitate identity theft of people who are authorized to work in the United States, including American citizens; and steal millions of dollars in federal and state payroll tax revenue meant for government benefit programs. The term “illegal aliens,” as used in the advisory, does not include US citizens or nationals, lawful permanent residents of the United States, or other aliens whose employment in the United States is authorized by statute or regulation.

The Immigration Reform and Control Act (IRCA) of 1986 prohibits US persons and entities from knowingly hiring or recruiting, or referring for a fee, unlawful aliens for employment. Under IRCA and its implementing regulations, employers are required to verify and document the identity and employment eligibility of their employees through the Employment Eligibility Verification Form I-9. According to US Immigration and Customs Enforcement (ICE), many employers across agriculture, construction, domestic service, hospitality, and other industries (hereinafter “complicit employers”) are knowingly — or through willful negligence — facilitating the hiring, concealment, and, in some cases, exploitation of unlawful alien labor in their workforce to reduce labor costs and gain an unfair advantage over competitors.

A key feature of these schemes is the use of identity theft in payroll fraud to conceal violations of IRCA and other US immigration laws. Complicit employers have knowingly accepted fraudulent identification documents such as legal permanent resident cards, Social Security cards, and driver’s licenses as evidence of authorized status for employment in the United States. According to recent ICE worksite enforcement operations, unlawful aliens illicitly obtain Social Security numbers and other personal identifiable information of US citizens and lawful permanent residents and submit this information to make the Form I-9s appear legitimate, gain unlawful employment and wages as well as employer- or government-provided healthcare benefits in the United States, and — based on FinCEN’s analysis of Bank Secrecy Act (BSA) reporting — fraudulently obtain access to financial services and extension of credit. Complicit employers can also conceal a violation of IRCA in the hiring of low-wage unlawful alien workers where off-the-books cash payments are made to such workers while maintaining two sets of books for payroll — one to submit fraudulent filings to the Internal Revenue Service and one to track the actual illegal payments. The advisory contains numerous case studies of violations.

Consistent with existing BSA obligations, the agencies encourage banks to consider the use of Individual Taxpayer Identification Numbers (ITINs) as part of their application of appropriate risk-based procedures for customer due diligence. Specifically, when an ITIN is presented in lieu of a Social Security number or valid employment authorization document to obtain credit products or open an account, banks are encouraged to assess whether the use of an ITIN may be a risk factor. The advisory describes red flags for customers, both individuals and companies (large and small).

Subsequently, on July 13, 2026, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency issued interagency guidance on lending to individuals not legally authorized to work in the United States (FIL-36-2026 and OCC Bulletin 2026-31), followed by the Federal Reserve issuing SR 26-4: Guidance on Lending to Individuals Not Legally Authorized to Work in the United States on August 13, 2026. The guidance is to remind supervised financial institutions of their existing obligations with respect to credit risk management, particularly as it relates to borrowers who are not legally authorized to work in the United States. The guidance addresses credit risk and underwriting considerations that may present elevated credit risk and uncertainty because of a borrower’s inability to generate income, maintain employment, and remain financially stable. Financial institutions are asked to consider whether uncertainties related to employment authorization may affect the stability and sustainability of income, repayment capacity, collateral recovery, and other factors relevant to credit risks.

The guidance notes that when a borrower’s income is derived from employment that is not legally authorized, the source of repayment may be less reliable and may present increased credit risks for various reasons, including employment termination due to lack of legal work authorization, suspension or termination after discovering that an employment authorization expired, the borrower’s inability to become lawfully reemployed, or the borrower’s removal from the United States. Repayment capacity must remain adequate under those various scenarios.

The guidance also addresses collateral considerations in enforcing security interests in personal property due to difficulties in contacting non-work-authorized borrowers or locating collateral consisting of personal property. The guidance also notes lending exposure to borrowers concentrated in specific geographic markets or industries that may be disproportionately affected by changes in immigration enforcement, employment verification practices, and labor availability, or by other workforce disruptions that could adversely affect the repayment capacity of multiple borrowers simultaneously.

FIL-36-2026 and OCC Bulletin 2026-31 differ from the Federal Reserve SR 26-4 by adding consumer determination compliance risk, referencing the Consumer Financial Protection Bureau’s (CFPB) June 8, 2026 issuance titled “Statement on Ability To Repay and Immigration Status” (91 FR 34607) concerning a creditor’s reasonable and good faith determination at or before consummation that the consumer will have a reasonable ability to repay the loan according to its terms.

CFPB advises that lenders are obligated to consider information that bears on the consumer’s underlying and continuing ability to earn income when residency in the United States is a necessary component of such employment. It further notes that the Equal Credit Opportunity Act as implemented by Reg B expressly states that a creditor may take the applicant’s immigration status into account.

In conclusion, financial institutions are expected to incorporate the risks associated with non-work-authorized borrowers into the underwriting, account management, credit classification, allowance analysis, and compliance processes while remaining consistent with applicable consumer protection laws.