WASHINGTON–A new order from the White House is meant to limit new compliance demands on financial institutions, but numerous questions remain and two credit union groups say they are “deeply opposed” to the president’s plan.
As the CU Daily reported here, President Trump has signed an executive order the White House says is aimed at tightening oversight of the U.S. financial system by directing federal agencies to strengthen anti-money laundering safeguards and identify potential abuse tied to illegal activity, while stopping short of requiring FIs to broadly collect citizenship information from customers.
The credit union trade groups had been warily awaiting the proposal, worried any citizenship-related demands would add to the compliance burden. Included in the new EO is that within 60 days Treasury is to issue an Advisory listing red flags for suspicious activity, including ITIN accounts, consular ID use, and payroll-related structuring.
Inclusiv, NLCUP Issue Joint Statement
In a joint statement, Inclusiv and the National Association of Latino Credit Union Professionals said, “Last night, President Trump issued Executive Order: Restoring Integrity to America’s Financial System, which directs the Secretary of the Treasury, in consultation with federal prudential banking regulators, including the National Credit Union Administration, to consider changes to the Bank Secrecy Act’s implementing regulations. The proposed regulatory changes would exclude immigrants from the mainstream financial system, restricting access to credit for people with Individual Taxpayer Identification Numbers (ITINs) as well as imposing limitations on the use of consular identification cards.
“Inclusiv and NLCUP are deeply opposed to the financial exclusion this Executive Order is likely to drive. If implemented as proposed, it would cause a surge in the number of unbanked people including immigrants with work authorization who may feel unwelcome at mainstream financial institutions as a result. And we will likely see increasing property crime as people carrying their paychecks in cash become attractive robbery targets,” the organizations continued. “All this to exclude from our financial system people who want nothing more than to achieve the American Dream and build a better life for themselves and their families. As our movement faces the challenges this Executive Order creates together, Inclusiv and NLCUP remain focused on working with community development credit unions to strengthen their local economies and effectively and responsibly serve their members.
What Makes Economy Function Best
“When people can save securely and fully participate in the economy regardless of immigration status, society is stronger and more stable as a result,” the statement continued. “The economy functions best when finances flow through regulated financial institutions like banks and credit unions because they are subject to well-established safeguards and regulatory oversight. In contrast, pushing more people and money flows outside of regulated financial systems creates gaps in visibility and greater risk of fraud and abuse, as well as increasing property crime.
“In addition to driving exclusion from the banking system and reducing the ability of federal regulators to safeguard our financial system, the Executive Order, if the recommended regulations are enacted, could create a nearly insurmountable operations and compliance burden for financial institutions in tracking the immigration and work authorization status of their members. This burden will be felt most acutely by small credit unions and will likely lead to closures and fewer affordable financial services in the communities that need credit unions the most,” the two groups stated.
Inclusiv and NLCUP stated the Executive Order is not binding law, and added, “But the proposal and directives are certainly concerning. We’ll be monitoring subsequent developments and providing updates to members and partners as more information becomes available.”
How Whte House Framed Decision
In the order, the White House framed the decision that banks would face credit risks if one of their customers were deported and any loans could no longer be repaid. The White House said it would not “permit risks to our financial system posed by the extension of credit or financial services to the inadmissible and removable alien population,” the Associated Press reported
A Lack of Data
“Since banks have never collected any information about their customers’ citizenship or immigration status, there are no reliable public figures on how much risk these customers pose to the financial system,” the AP analysis noted.
The AP cited a study by the left-leaning Urban Institute estimated that between 5,000 and 6,000 mortgages were issued to customers with Individual Taxpayer Identification Numbers (ITINs). These ITINs are typically used by undocumented workers in place of a Social Security Number, and credit unions have been among the lenders that in some cases make ITIN loans.
Since the order only offers guidance to the financial institutions instead of a mandate, it “appears the banks were able to win over the White House” following extensive lobbying, the AP said.
What Immigration Advocates Say
“Immigration advocates have previously said any order that would order banks to collect citizenship information would likely result in undocumented immigrants moving out of the financial system, increasing the number of ‘unbanked’ individuals,” the AP report stated.
The AP further noted the White House has taken other measures to discourage undocumented workers from using the financial system. The Treasury last November announced that it would reclassify certain refundable tax credits as “federal public benefits,” which bars some immigrant taxpayers from receiving them, even if they file and pay taxes and would otherwise qualify.
Tax Experts Weigh In
Tax experts told the AP immigrants brought to the U.S. illegally by their parents as children, known as Deferred Action for Childhood Arrivals, or DACA, recipients, and immigrants with Temporary Protected Status would be largely affected by the planned change.
Trade Groups Respond
The credit union trade groups both issued statements following the new EO.
America’s CUs Reviewing Order
In a statement, America’s Credit Unions President and CEO Scott Simpson said credit unions welcomed the administration’s decision to seek stakeholder input before imposing new compliance mandates.
“We appreciate President Trump’s approach to ensure compliance burdens do not weigh heavily on credit unions as it considers ways to verify account holder identities,” Simpson said in a statement. “We have engaged the administration on this issue, highlighting the high regulatory standards credit unions are held to, and encouraged policymakers to pursue these efforts through an official rulemaking process. While we continue our review and assessment of the Executive Order, it appears as though the directive aligns with our requests for stakeholder input and time to implement any changes.”
DCUC Responds
In a statement, DCUC President and CEO Anthony Hernandez, said, “The Defense Credit Union Council, DCUC, appreciates President Trump’s focus on modernizing financial regulatory frameworks to better reflect today’s digital economy and evolving consumer expectations. Credit unions have long embraced responsible innovation to expand access, strengthen financial readiness, and better support communities across the Nation, including our men and women in uniform, young families, veterans, and underserved populations. We look forward to reviewing the Administration’s proposals and working collaboratively with regulators and policymakers to develop common-sense regulatory approaches that encourage innovation while preserving safety and soundness.”
Added DCUC Chief Advocacy Officer Jason Stverak, “As these efforts move forward, DCUC strongly urges regulators to adopt appropriately tailored requirements that recognize the unique structure and mission of credit unions, especially smaller and mid-sized institutions that often face disproportionate compliance burdens. A balanced and right-sized regulatory framework will help ensure credit unions remain competitive, continue investing in technology, and expand access to affordable financial services to communities nationwide.”
