FinCEN Warns Banks, Credit Unions To Watch For Illegal Employment Schemes
By CU Today Staff —
WASHINGTON—The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a new advisory urging banks, credit unions and other financial institutions to increase scrutiny of financial activity tied to the unlawful employment of undocumented workers, warning that such schemes can fuel identity theft, tax fraud and broader criminal enterprises.
The advisory, issued jointly with the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and NCUA, outlines how employers and labor brokers may use the financial system to conceal the hiring of unauthorized workers. Treasury Secretary Scott Bessent said the effort supports the Trump administration’s broader push to strengthen border security and prevent abuse of the U.S. financial system.
According to FinCEN, payroll tax fraud and identity theft are common features of these schemes, particularly in industries such as agriculture, construction, hospitality and domestic services. The agency said financial institutions reported more than $2.5 billion in suspicious activity linked to payroll tax fraud schemes during 2025. In one case highlighted by FinCEN, a payroll operation employing undocumented workers allegedly cost the U.S. government more than $38 million in lost tax revenue.
The advisory also details how labor brokers may establish shell companies, sometimes using foreign identity documents or Individual Taxpayer Identification Numbers (ITINs), to open accounts, receive payments from employers and distribute wages outside traditional payroll systems. FinCEN is encouraging financial institutions to incorporate the use of ITINs into their risk-based customer due diligence processes and to remain alert for suspicious transactions that may indicate payroll fraud, tax evasion or other illicit activity.
"Credit unions have long served as trusted stewards of the financial system, balancing member service with a strong commitment to compliance and financial integrity," said Anthony Hernandez, DCUC president/CEO, ret. U.S. Air Force colonel. "DCUC welcomes efforts to provide financial institutions with clear guidance and practical tools to identify suspicious activity, strengthen risk management practices, and support the collective effort to combat fraud and other illicit financial activity."
Jason Stverak, DCUC chief advocacy officer, added, "We look forward to working with regulators and industry partners to ensure credit unions have the resources needed to effectively fulfill these responsibilities, while continuing to advocate for a risk-based, tailored approach that recognizes the unique challenges of smaller credit unions and avoids unnecessary regulatory burden."
Originally reported by CU Today.