A new proposal from Treasury Secretary Scott Bessent could significantly change how banks in the United States operate. While banks are already required to verify customer identity, a potential executive order would go further by requiring them to collect and verify citizenship or immigration status. This move is part of a broader policy push tied to immigration and financial oversight.
Bessent made it clear that banks may not have a choice in the matter. “If Treasury and the banking regulators say it’s their job, it’s their job,” he stated during a public forum in Washington, D.C. This signals a strong regulatory stance that could reshape banking procedures nationwide.
Current Banking Rules in the U.S.
Right now, U.S. banks do not require proof of citizenship to open an account. Instead, they follow strict identity verification rules under the “Know Your Customer” (KYC) framework. These rules are designed to prevent fraud, money laundering, and other financial crimes.
Banks typically collect:
- Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
- Full name and date of birth
- Address and identification documents
These requirements are backed by laws like the Bank Secrecy Act and the USA PATRIOT Act, which aim to ensure financial transparency and security. Despite these safeguards, Bessent argues that they are not enough because they do not clarify a person’s legal or citizenship status.
What the Proposed Executive Order Would Change
The proposed executive order would require banks to go beyond identity verification and confirm whether a customer is:
- A U.S. citizen
- A permanent resident (green card holder)
- A valid visa holder
According to Bessent, this is necessary to truly “know your customer.” He questioned how banks can properly assess risk if they do not know whether someone is legally in the country.
The proposal also aligns with broader political efforts to link immigration status with access to public systems, including financial services, voting, and census data collection.
Political Support and Legislative Efforts
The idea has gained traction among some lawmakers. Senator Tom Cotton introduced legislation earlier this year that would require banks and credit unions insured by federal agencies to verify legal status before opening accounts.
His proposal includes an additional layer of verification to confirm whether individuals are legally present in the United States. Cotton has also previously urged the Treasury Department to review policies that allow undocumented immigrants access to financial services.
Economic and Industry Concerns
While some policymakers support stricter rules, banks and policy experts have raised concerns about the potential impact. One major issue is the cost and administrative burden.
A study estimated that implementing citizenship verification could result in:
- 30 million to 70 million additional paperwork hours
- $2.6 billion to $5.6 billion in compliance costs
These figures highlight how complex and expensive the transition could be, especially when verifying not just new customers but also existing account holders.
Impact on Non-Citizens and the “Unbanked”
Another key concern is the effect on non-citizens, particularly undocumented immigrants. Currently, many individuals without legal status can open bank accounts using an ITIN. This allows them to:
- Pay taxes
- Store money safely
- Avoid reliance on cash-only transactions
If stricter rules are implemented, many of these individuals could become “unbanked,” meaning they no longer have access to formal financial services.
Being unbanked is often linked to:
- Limited economic mobility
- Higher financial risk
- Reduced participation in the broader economy
Experts warn that pushing large groups out of the banking system could have negative ripple effects on economic growth and stability.
Comparison with Other Countries
Bessent has argued that the United States is behind other nations when it comes to banking requirements. According to him, many countries already require citizenship or legal status verification for financial access.
However, there is no global standard. Banking rules vary widely, and while some countries enforce stricter identity checks, others maintain more flexible systems similar to the current U.S. model.
Summary Table
| Aspect | Current System | Proposed Changes |
|---|---|---|
| Citizenship Requirement | Not required | Mandatory verification |
| Identity Checks | SSN/ITIN, ID, address | Same + legal status |
| Legal Basis | BSA, PATRIOT Act | New executive order |
| Impact on Banks | Standard compliance | Higher costs and workload |
| Impact on Non-Citizens | Access to banking | Possible exclusion |
The proposed requirement for banks to verify citizenship marks a major potential shift in U.S. financial policy. While supporters argue it would strengthen oversight and align banking with immigration laws, critics warn of high costs and unintended economic consequences.
At its core, the debate is about balancing security and compliance with financial inclusion and economic participation. If implemented, the policy could reshape how millions of people interact with the U.S. banking system, making it one of the most significant regulatory changes in recent years.
