Treasury Secretary Bessent Pushes Banks to Collect Citizenship Data
Treasury Secretary Scott Bessent is pushing for a major regulatory change, advocating that banks adopt mandatory collection of citizenship and legal status data for all customers. This proposed shift, tied to an upcoming Executive Order, aims to strengthen financial controls and prevent money laundering by restricting access to the U.S. banking system for undocumented immigrants. While current Know Your Customer (KYC) rules require identity verification (using SSNs, DOBs, etc.), Bessent argues this is insufficient because it does not confirm a customer's legal status. Proponents, including Senator Tom Cotton, support stricter rules, while critics warn that the mandate would impose billions of dollars in administrative costs and could negatively impact the broader economy by limiting financial access.
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Treasury Secretary Scott Bessent is advocating for a significant overhaul of banking regulations, proposing that financial institutions be mandated to collect detailed citizenship and legal status data on all customers. This move, tied to a pending Executive Order (EO), aims to strengthen financial controls and restrict access to the U.S. banking system for undocumented immigrants.
The Proposed Regulatory Shift
During an appearance at the Invest in America Forum, Secretary Bessent stated that banks must prepare for new requirements, asserting that if Treasury and banking regulators deem it their job, it is mandatory. He indicated that the planned Executive Order is currently "in process."
Goal: To enhance financial oversight and prevent money laundering.
Focus: Restricting access to U.S. banking services for foreign nationals lacking legal status.
Stance: Bessent argued that current Know Your Customer (KYC) rules are insufficient, questioning how banks can verify a customer's status without knowing their citizenship or legal standing.
Current Banking Requirements vs. New Mandates
Currently, U.S. banks are required to verify client identities using established KYC protocols, which are designed to prevent financial crime. However, these rules do not mandate citizenship verification.
Existing KYC Requirements: Banks typically collect documents such as Social Security numbers, names, dates of birth, and addresses to verify identity and assess risk.
Bessent's Critique: Bessent argued that the current system fails to distinguish between legal and illegal residents, stating, "Why can unknown foreign nationals come and open a bank account?" He noted that most other countries require citizenship information for banking access.
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Political Support and Economic Concerns
The push for stricter verification has received support from some political figures, while policy experts have raised alarms regarding the potential economic fallout.
Legislative Support
Senator Tom Cotton (R-AK): Introduced legislation requiring FDIC or NCUA-insured banks to verify that account holders are U.S. citizens, permanent residents, or in the country on a valid visa.
Previous Advocacy: Cotton previously urged the Treasury Department to review rules that allow illegal aliens access to financial services.
Economic and Operational Concerns
Policy experts and financial institutions have warned that mandatory citizenship verification could impose massive administrative burdens and potentially damage the economy if access to banking services is restricted.
Administrative Costs: The American Action Forum estimated that implementing such a requirement could add between 30 million and 70 million paperwork hours, with associated costs ranging from $2.6 billion to $5.6 billion.
Scope of Impact: Experts noted that the cost estimation is likely an underestimate, as it does not account for the complexity of verifying existing account holders.
