An executive order that’s “in progress” could cost banks billions of dollars — and millions of hours.
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This week, Treasury Secretary Scott Bessent teased a coming executive order requiring banks to obtain citizenship data for new and existing account holders. When asked about potential pushback, he said banks should be ready to comply.
“If Treasury and the banking regulators say it’s their job, it’s their job,” Bessent said on Wednesday.
If that plan becomes reality, banks could face a costly, time-consuming set of new logistical processes. The American Action Forum, a center-right think tank, estimated that the new requirement could add between 30 million and 70 million additional hours of paperwork and cost between $2.6 billion and $5.6 billion.
Banks in the US must verify customers’ identities, but citizenship documents aren’t necessarily part of that process. Under the federal Customer Identification Program, banks must collect accountholders’ names, birthdays, addresses, and taxpayer identification numbers, such as a Social Security Number or an individual taxpayer identification number.
American Action Forum’s analysis, based on data from existing verification programs, found that a citizenship verification rule could have broader impacts “if such directives disrupted the banker-customer relationship across a significant number of accounts.”
Chasse Rehwinkel, the president of Devon Bank, a community bank in the Chicago area, told Business Insider that requiring banks to verify citizenship would serve no clear regulatory purpose and be burdensome for banks.
He also said that, depending on how the order is implemented, it could dissuade some people from banking if they don’t have the necessary paperwork, like a passport or birth certificate, or if they have changed their name or address and the information on their paperwork isn’t up to date.
“People that don’t have access to banking don’t have access to our economic system in the same way and tend to have to rely on predatory lenders,” he told Business Insider.
Rehwinkel, who previously served as the banking director for the state of Illinois, said most information collected by banks was for safety and fraud prevention, but that this requirement would be an added regulation without any clear benefit. He also said the policy seemed counter to the Trump administration’s objective of deregulation.
“How is this not adding red tape?” he said. “Adding additional collection of information is adding additional regulation.”
Higher compliance costs and lost customers
George Braunegg, a professor at the University of Southern California’s Marshall School of Business, said there was “no question” the rule would raise banks’ costs.
“New onboarding procedures, system upgrades, audits, and legal oversight. These aren’t one-time — they’re ongoing,” he told Business Insider.
He said if it requires banks to collect citizenship data for existing account holders, as is likely, it would cost them both in terms of compliance and in lost customers. Consumers could also pay more as some banks could pass on costs via account fees, he said.
Dissuading people from banking was “one of the more predictable outcomes,” Braunegg said, adding that could include people trying to avoid deportation, those with unclear citizenship status, and dual citizens who are “wary of cross-border reporting.”
It could also include international or high-net-worth clients, who he said tend to be highly mobile, meaning they can take their banking elsewhere.
“This is where the largest financial stakes are on the revenue,” he said.
Braunegg said there could be potential upsides to the new rule, including insights into cross-border money flows, enforcement of sanctions and tax compliance, and easier identification of shell accounts tied to specific jurisdictions. But he said that money laundering risks are typically more closely tied to factors other than citizenship, such as transaction patterns.
Anil Kashyap, professor of economics and finance at the University of Chicago’s Booth School of Business, said the requirement could also raise privacy concerns.
“People just may not want to be sharing even more information with the banks,” he told Business Insider. “There’s already a debate about whether some people don’t participate in the financial system because they just don’t want to reveal personal information.”
The new document requirement, if enacted, would impact a vast majority of Americans. As of 2023, around 96% of US households — roughly 128.0 million in total — were banked, meaning at least one person had a checking or savings account, according to an FDIC survey.
Another immigration-related policy change from the Trump administration has come down hard on banks, which had generally anticipated an era of deregulation and reduced red tape under the president’s second term.
President Donald Trump raised the fee for H-1B visa applications to $100,000 in September, and filings at major financial firms, including JPMorgan and Goldman Sachs, have since fallen, according to recent data.
More recently, he floated a 10% cap on credit card interest rates for one year, which many Wall Street leaders said would reduce access to credit. JPMorgan CEO Jamie Dimon said the plan would be an “economic disaster.”
The Treasury and the White House did not respond to requests for comment from Business Insider.
