On May 19, 2026, President Trump signed two executive orders: Restoring Integrity to America’s Financial System (the “AML Compliance EO”); and Integrating Financial Technology Innovation into Regulatory Frameworks (the “Fintech EO”). Both have significant implications for the U.S. financial services sector. The AML Compliance EO directs the Secretary of the Treasury (the “Treasury”) and federal financial regulators to (i) strengthen customer identification and due diligence requirements under the Bank Secrecy Act (BSA), (ii) issue advisories identifying red flags tied to payroll tax evasion and other illicit activity, and (iii) address credit risks posed by extending financial services to individuals without legal work authorization.
The Fintech EO directs federal financial regulators to review existing regulations, guidance, and supervisory practices to identify opportunities to facilitate innovation and greater competition in the provision of financial services, while maintaining safety and soundness. Furthermore, the Fintech EO requests that the Board of Governors of the Federal Reserve System (the “Federal Reserve”) evaluate the legal, regulatory, and policy frameworks governing access to Federal Reserve Bank payment accounts and payment services by uninsured depository institutions and non-bank financial companies. Taken together, these executive orders signal the Administration's intent to simultaneously tighten controls against illicit financial activity and lower barriers to entry for financial technology firms seeking to compete with traditional financial institutions.
The AML Compliance EO
The AML Compliance EO emphasizes the current administration’s refusal to “tolerate national security and public safety risks caused by illicit cross-border financial activity” and underscores the risk posed to the U.S. financial system by the extension of credit or financial services to the “inadmissible and removable alien population.” The executive order contends that weak know-your-customer (KYC) practices can enable terrorism financing, narcotics trafficking, human trafficking, money laundering, and other illegal activity. It further asserts that lending to individuals without legal work authorization creates repayment and compliance risks for financial institutions, particularly where employers violate U.S. federal immigration or tax laws. Among other associated risks, the AML Compliance EO highlights the structural “ability to repay” deficiency inherent in lending to unauthorized workers, which it characterizes as undermining the safety and soundness of the national banking system.
The executive order directs the Treasury to issue formal advisory guidance warning financial institutions about suspicious activity tied to unauthorized workers and employers within 60 days of the date of the executive order (i.e. by July 18, 2026). The AML Compliance EO provides that the guidance should identify the following red flags:
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evidentiary patterns of payroll tax evasion by employers or labor brokers, including the systematic failure to withhold or remit federal employment taxes for non-work-authorized individuals
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the utilization of certain foreign-identity documents, nominee accounts, shell companies, or complex “funnel” structures designed to obfuscate the identity of ultimate beneficial owners or conceal the true nature of payroll disbursements
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the strategic use of unregistered money services businesses, third-party payment processors, or peer-to-peer platforms to facilitate “off-the-books” wage payments intended to bypass BSA reporting thresholds or tax obligations
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patterns of repetitive, sub-threshold cash withdrawals or deposits that correlate with payroll cycles conducted outside of regulated payroll processing systems, also known as “structuring and micro-structuring”
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financial activity indicative of labor trafficking or forced labor (as defined in 18 U.S.C. § 1589), where proceeds are commingled with legitimate business revenue or transferred to foreign jurisdictions
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the use of an individual taxpayer identification number (ITIN) to obtain credit products or open depository accounts where the applicant lacks verified lawful immigration status. Although an ITIN facilitates tax compliance, its use in lieu of a Social Security number or valid work-authorized visa may be identified as a risk factor requiring enhanced due diligence to ensure the account is not being utilized to facilitate the unlawful employment of unauthorized aliens.
In addition, by August 17, 2026, the Treasury and the appropriate federal functional financial regulators are directed to propose changes to applicable implementing regulations of the BSA that strengthen risk-based customer due diligence requirements for covered financial institutions. These changes should require institutions to better verify customer identity information and beneficial ownership of accounts, while also permitting them to gather additional information (e.g. lawful immigration and employment status) where other “risk indicators or supervisory concerns” exist. Requests for such information are to be limited to instances where the information is relevant to assessing risks associated with fraud, identity misrepresentation, sanctions evasion, or other illicit financial activity, as part of a risk-based customer due diligence program.
Finally, within 180 days of the date of the order (i.e. by November 15, 2026), the Treasury and the appropriate federal functional financial regulators are further directed to consider stronger risk-based customer identification program requirements, including addressing risks associated with foreign consular identification cards.
The fintech executive orders
The Fintech EO is designed to streamline regulatory requirements and promote financial innovation and collaboration among financial technology (“fintech”) firms, federally regulated financial institutions, and Federal financial regulators (i.e. the Consumer Financial Protection Bureau, the Securities and Exchange Commission, the National Credit Union Administration, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency). With a stated intent to foster financial innovation and allow integration of digital assets into traditional financial services, the executive order (i) directs every federal financial regulator to remove overly burdensome and fragmented regulations and supervisory practices that form barriers to entry and primarily benefit “incumbent financial services firms” and (ii) requests that the Federal Reserve evaluate frameworks governing access to Federal Reserve payment services.
Specifically, the executive order directs the head of each federal financial regulator to review existing rules, guidance, supervisory practices, and application processes within 90 days of the date of the executive order (i.e. by August 17, 2026) to identify changes that could promote innovation and competition for fintech firms, with particular emphasis on smaller and emerging companies. The review is intended to identify regulations and policies that unnecessarily hinder partnerships between fintech firms and federally regulated financial institutions (e.g. insured depository institutions, credit unions, broker-dealers, investment advisers, and futures commission merchants), or that slow approval processes for bank charters, credit union charters, insurance, licenses, and other authorizations. Importantly, the executive order contemplates that resulting reforms will balance innovation with safety and soundness, consumer and investor protection, market integrity, financial stability, and regulatory oversight.
In addition, within 180 days of the date of the executive order (i.e. by November 15, 2026), the head of each federal financial regulator is directed to take steps, in consultation with the Assistant to the President for Economic Policy, to encourage innovation based on the findings of those reviews.
Perhaps most importantly, the Fintech EO addresses access to Federal Reserve services. In particular, the executive order requests that the Federal Reserve complete reviews similar to those described above and evaluate the legal and regulatory framework governing access to Federal Reserve System payment accounts and payment services by uninsured depository institutions and non-bank financial companies, including firms engaged in digital assets and other novel financial services. These non-traditional financial institutions have found themselves effectively “de-risked” by the Federal Reserve System, leaving them on an unlevel playing field with traditional insured depository institutions who enjoy unfettered access to Federal Reserve System payment services. The Federal Reserve must submit a report to the Assistant to the President for Economic Policy within 120 days of the date of the order (i.e. by September 16, 2026), examining:
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the legal authority of the Federal Reserve to extend direct access to Federal Reserve payment accounts and payment services to covered firms
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options for expanding such access to the extent permitted by law, subject to appropriate risk management requirements
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legal impediments that preclude direct access, including a detailed analysis of those impediments, and legislative or regulatory options that would enable such access while mitigating risks to the payment system, financial stability, and the U.S. economy
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whether, and if so to what extent, each of the twelve Federal Reserve Banks has legal authority to act independently of the Federal Reserve in granting or denying access to Reserve Bank payment accounts and payment services and, if such independent action is legally permissible, what Board-level regulations or policies the Federal Reserve has established or proposes to establish to ensure that covered firms are evaluated on a consistent basis regardless of which Federal Reserve Bank receives or processes their applications.
If the Federal Reserve concludes that current law permits direct access by covered firms, it is requested to establish transparent application procedures and render decisions on complete applications within 90 days of the application date.
Practical takeaways
Financial institutions, fintech companies, and other market participants should consider the following in light of the executive orders signed on May 19, 2026:
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As long as this Administration is in power, there will be a growing supervisory expectation that banks verify U.S. federal immigration status for every customer.
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Banks and other covered financial institutions should begin evaluating their existing BSA compliance programs, customer identification procedures, and KYC protocols in anticipation of strengthened regulatory requirements, in particular, enhanced customer due diligence requirements.
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Institutions that extend credit or provide financial services to populations identified as higher risk under the AML Compliance EO should assess whether their current due diligence frameworks are sufficient to detect the red flags outlined in the executive order, including payroll tax evasion patterns, structuring activity, and the misuse of ITINs.
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As a practical matter, banks will likely begin collecting more supporting documentation, escalating high-risk accounts more frequently, increasing scrutiny of customer relationships, and reviewing beneficial ownership structures more aggressively.
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Notably, the impact of these enhanced requirements may vary by jurisdiction. States, such as the so-called “sanctuary” states (i.e. states that do not cooperate with the U.S. government on federal immigration policy enforcement), that issue driver’s licenses or state identification documents without requiring proof of lawful immigration status, may present particular challenges for financial institutions seeking to comply with strengthened customer identification obligations. In those states, institutions may need to develop alternative verification procedures or supplemental documentation requirements to compensate for the reduced reliability of state-issued identification as a proxy for immigration status, whereas institutions operating in states such as Florida, which already require proof of legal status to obtain a driver’s license, may find the transition less burdensome.
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The Fintech EO represents a strong policy signal that the current administration favors easier regulatory engagement, faster approvals, and fewer barriers between fintech firms and core banking infrastructure. Fintech firms seeking bank partnerships, OCC trust charters, payment licenses, or Federal Reserve payment access may encounter a more favorable regulatory environment as a result.
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The most significant implication for cryptocurrency and stablecoin firms is the potential expansion of access to Federal Reserve payment rails, master accounts, and direct settlement infrastructure. If the Federal Reserve determines that existing law permits direct access, the resulting application framework could fundamentally reshape the competitive landscape for firms that have traditionally been excluded from the federal payments infrastructure.
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