FinCEN advises banks on payroll fraud tied to workers

The U.S. Department of the Treasury has issued a formal advisory urging financial institutions to detect and report financial crimes associated with the unlawful employment of individuals not authorized to work in the country. The guidance, published Friday, calls on banks to identify red flags linked to payroll tax fraud, identity theft, and money laundering schemes.

The advisory was issued by the Treasury’s Financial Crimes Enforcement Network (FinCEN) in coordination with federal banking regulators. It follows an executive order signed by President Donald Trump in May directing financial agencies to strengthen oversight of banking activities in relation to immigration compliance. The order instructs regulators to treat immigration status as a factor in financial risk assessments.

Officials stated that illicit payroll schemes often involve shell companies and labor brokers who use stolen or fraudulent identities to evade taxes and exploit workers. These activities are frequently seen in industries such as construction, agriculture, hospitality, and domestic services. The Treasury cited data showing banks reported more than $2.5 billion in suspicious activity linked to payroll...