The Trump administration is considering an executive order or other regulatory action that would require banks to collect “proof of citizenship” from customers.
This wouldn’t just apply to customers opening new accounts. Banks would have to go back and collect this information from existing customers, a process described as ‘retroactive’ and that could create huge administrative nightmares for banks and could force closure of existing accounts where paperwork isn’t submitted by customers in a timely manner or where paperwork doesn’t match the procedures that banks are pressued to adopt.
The administration is looking to require passports – even REAL ID drivers licenses would not be sufficient because they do not prove citizenship (just identity). The Trump administration is not denying these reports, and refuses comment.
- It is not clear whether banks would merely collect additional information
- or whether the policy would require closing accounts or bar opening accounts for non-citizens, or those who can’t produce documentation
- Although in practice bank compliance often requires ‘de-banking’ to ensure they remain in good graces with regulators – the inability to produce compliant documentation is often seen as a regulatory risk that makes dealing with customers in the category not worthwhile.
It’s unclear what treatment lawful non-citizens would receive under such a regime. And no more than half of U.S. citizens even have passports.
My best read is this is an attempt to use the Financial Crimes Enforcement Network and Anti-Money Laundering rules for immigration enforcement, debanking, and national identity registration.
What Possible Legal Authority Is There For This?
The President can’t just order banks to collect a new category of personal data without statutory authority. So it seems like they try to leverage existing Bank Secrecy Act and USA PATRIOT Act authorities.
- Issue a new regulation, such as under Section 326 of the USA PATRIOT Act (31 U.S.C. § 5318(l)) which sets “minimum standards” for verifying customer identity. This is usaully for opening accounts.
- Citizenship becomes a required attribute to establish identity and manage anti-money laundering risk. So it’s a Know Your Customer component.
- FinCEN can impose additional recordkeeping and reporting requirements, but that’s limited to 180 days (renewable).
Requiring Citizenship For Bank Accounts Is Blatantly Illegal, Right?
Yes. PATRIOT Act Know Your Customer authority is about establishing identity, not about excluding non-citizens from banking or immigration restriction. Anti-immigration Senator Tom Cotton (R-AR) issued a letter asking the Treasury Department to explore if these rules “could appropriately be utilized” to prevent “illegal immigrants” from opening accounts. Even he didn’t think there was clear legal authority.
- It would be arbitrary and capricious. There’s no clear linkage between citizenship and banking access, or why less burdensome alternatives couldn’t be used to accomplish similar (legitimate and statutorily-authorized) goals.
- Guidance instead of notice and comment followed by promulgating a rule will be even more open to challenge.
- This is described as retroactive for existing accounts, and imposing new consequences on existing, lawful activity without clear legislative authorization will be open to challenge.
- Regularized transmission of citizenship data to government likely runs afoul of the Right to Financial Privacy Act, which says that no government authority may access customer financial records unless statutory procedures are satisfied (consent, subpoena, warrant).
If the rule is effectively only citizens can have bank accounts that includes a ban on accounts for lawful permanent residents, foreign students, legal workers, and refugees. That would mean any order or rule would likely be in conflict with immigration statutes.
So What Could The Administration Plausibly Do?
It seems like the administration could seek a requirement of providing citizenship information as part of identity verification in establishing ank accounts. They could issue a draft rule amending existing Know Your Customer regulations under 31 U.S.C. § 5318(l).
They’d publish a Notice of Proposed Rulemaking, outlining the legal authority relied upon, offer a proposal and questions, and take public comments. Then they’d issue a final rule responding to and considering comments. It would almost certainly be phased in, especially given the burden of adding this information for existing customers with accounts.
Banks would need to update their internal policies, customer onboarding procedures, and outline processes for existing customers.
But This Will Be A Mess
If passports are demanded then it’s a problem for half the country, so that seems unworkable. REAL ID is expressly discussed as not being sufficient, since that proves identity but not citizenship.
Millions of citizens would have to start coming up with documents, and banks would have to start chasing this and monitoring status – and closing accounts for citizens that don’t provide the information in a timely manner.
Passport alternatives like birth certificates and naturalization certificates aren’t as uniform and will need to be judged for validity – which means there will be mistakes.
Then the question becomes citizenship for non-individual accounts (such as corporate or trust accounts), joint accounts, minors, estates, and foreign-owned US businesses.
When my grandmother passed away, her son – not a U.S. citizen – was the executor of her estate. Not all banks would allow him to act as signer on the relevant accounts, or to set things up without appearing in-person (he lives in Australia). But he needed to manage her affairs.
Foreign businesses need U.S. accounts all the time, for their subsidiaries and for transacting business in the United States.
The U.S. wants more financial accounts based here – not just for the economy, but also because it’s a strong lever for exerting U.S. influence over the rest of the world through the financial system. Making it harder for non-citizens to transact business through the U.S. financial system gives up power and leverage!
De-Banking Becomes A Problem
The rule – or, more to the point, a bank’s defensive de-risking policy developed in response to it, will mean closures of accounts and denials of new accounts. That pushes people into more costly and less-regulated forms of banking. It also means financial resources moving out of banks, which isn’t good for their stability.
Pushing activity out of the banking system increases cash and informal transactions, making illicit finance transaction detection harder, so this moves in the opposite of the purpose of the underlying rules.
It’s also inconsistent with the administration’s stance against “debanking.” The President himself is literally suing J.P. Morgan Chase for debanking him!
Looks like Gary gave up Travel for Left Wing Political Commentary. Maybe he should move this blog to BlueSky ?
Trump is a joke and a deranged criminal I thought Republicans were all about small government and no overreach?
@texastj – banking access has been a central topic here for about 18 years. What here do you think is inaccurate? Worrying about debunking is historically a more market-oriented, conservative position as well!
Probably illegal? And a mess? That tracks for de fuhrer and his decisions.
This could be solved if the EMPLOYERS who hire illegals like hotels, agriculture, meat processing, were fined or arrested. But those fat cats are campaign donors, so instead they pass stupid things like this that make everyone’s life more complicated.
Oh, now the leftists care about what’s legal. You know what’s also illegal? Crossing the border illegally. Impeding federal officers. Assaulting federal officers. Defrauding the government. Assassination. But thanks for pretending to suddenly care about law and order.
Excellent, harassment just so they can show power and have more control over the populace. I imagine “underground” banks, run by loan sharks and other criminals, will have a field day picking up the slack. Fortunately the banks are major economic players and likely won’t go along with this nonsense by fiat. And it sure won’t win him any friends among the public.
Gary, you obviously spent some time and “ink” on this post, and while you were doing that you probably weren’t focused on other tasks. Now, zoom out and take in a much larger perspective. All of these outrageous statements and proposals are clearly illegal, but they succeed in their primary objective. MISDIRECTION The more time all of us spend chasing shadows means less time (and attention) paid to the one issue that’s a millstone around the neck of our Glorious Leader – The Epstein Files. An added bonus is also not focusing on the fact that a large chunk of our Navy is parked in the Middle East.
I’m OK with agreeing to disagree, @Gary. For starters, “banking access” has NOT been “a central topic here for about 18 years”, Credit Card access has (radically different). In addition, “Worrying about debunking is historically a more market-oriented, conservative position as well” is NOT accurate, the conservative position regarding debanking relates to Legal United States Citizens, and not Illegal Aliens. My statement stands, this is a non-travel related editorial pushing a Left Wing position, just a continued tilt of your Blog to Left Wing political opinion. You do so at your peril, at a minimum it reduces your influence regarding travel-related issues.
What does this have to do with flying and or airlines? Gary there’s always multiple angles to a story. Prob won’t even happen. Dems still think they won the election and use any platform to knock POTUS just like Dems wouldn’t stand for a mother whose daughter was murdered by an illegal. Let’s be fair and balanced and truthful
I ask what the EU does in terms of banking. They certainly ask for lawful presence information as a requirement to open bank accounts.
Would that be just replicated here?
As a visitor I can’t even open up a Swedish bank account to help with travel….so is this requirement from the USA just trying to match what’s around the world?
I have seen bank accounts opened in EU countries for non-EU citizens who aren’t resident in the EU.
Not sure why you would want a bank account in Sweden as a traveler since it’s increasingly difficult to deal with cash in Sweden and more and more airport forex places outside of Europe no longer even accept Swedish cash for conversion into local cash.
Not only would this create friction, but I have no idea how it would help make any type of banking determination. Banks do business with non-citizens all the time. The Switzerland and the Cayman Islands have a whole industry around this. KYC laws….sure. But using banks as an enforcement arm of immigration law is just a way to guarantee that anyone with means does not bank with an American institution. International accounts will be all the rage, and cell phones make it so we can all open accounts anywhere in the world without much trouble.
Its harder to shovel snow on NYC thrn it is to open a bank account
It is not easy to open an account in most countries without showing such data (unless you are wealthy and have lawyers – true of most things in life). It really all started (including the expansive application of FINCEN, which was a pre-existing law) with FATCA, and that was an Obama initiative. In fact, he campaigned on it. He phrased it as making tax evasion tougher, which it did, but it also snared the little people. The EU originally complained about FATCA, then decided they would copy it and adopt their own measure, the CRS. So here we are.
Also, am skeptical this will happen, or will happen as described, and do not recall any prior articles on this blog about the difficulties of opening accounts in the US or anywhere in the world. Someone (like me) can travel internationally a lot for work and otherwise and never have to worry about FATCA, CRS, FINCEN , GDPR, or any of this bank account nonsense. This subject is irrelevant to travel.
@Arthur – “do not recall any prior articles on this blog about the difficulties of opening accounts in the US or anywhere in the world” just search “durbin amendment” and “know your customer”