The Trump administration reported the single largest month for arrests by ICE in July, but now, its efforts are moving beyond the border and into community banks.
Treasury Secretary Scott Bessent traveled to Arizona on Thursday to tell lenders to view credit applications under an increasingly scrutinized lens.
“This administration will not tolerate blatant abuse of our financial system, nor will it permit risks posed by the extension of financial services to illegal aliens,” Bessent told the bankers.
He was careful to frame the ask as part of the bankers’ ordinary duties rather than an expansion into border enforcement.
“We do not ask bankers to assume the burdens of border enforcement,” Bessent said. “But we depend on banks to do what you do best: know your customers, identify risks as they arise, and report suspicious patterns before they metastasize into criminal schemes.”
The administration is pushing the banks to view lending money to undocumented immigrants as an added risk. The administration outlined concerns, such as the possibility of deportation and termination after an employer discovers the employee doesn’t have a valid work authorization. The guidance does not carry the force of law, however, as banks are not prohibited from offering accounts or loans to illegal immigrants.
Bessent argued that Arizona carries particular weight in the effort, telling the bankers the state “remains uniquely exposed to the aftershocks of Biden’s border crisis, including cartels and criminal organizations that seek to conceal illicit proceeds within legitimate channels.” He made similar remarks in Texas, given its proximity to the southern border.
Critics of the Trump administration’s new guidance argue that community banks will suffer if they have to bear the burden of increased compliance as they face pressure to more closely scrutinize their customers.
The National Association of Latino Credit Unions and Professionals said the guidance will create a “nearly insurmountable operations and compliance burden for financial institutions in tracking the immigration and work authorization status of their members. This burden will be felt most acutely by small credit unions and will likely lead to closures and fewer affordable financial services in the communities that need credit unions the most.”
Bessent responded to that criticism by framing the federal government’s relationship with community banks as a two-way street. The secretary told the audience that even as Washington leans on community banks for vigilance, Treasury owes them relief from what he called years of “overregulation” that has cut the number of community and small banks in half since the 2008 financial crisis.
“Dodd-Frank was supposed to end ‘too big to fail,'” Bessent said. “Instead, it created ‘too small to succeed.’”
He reminded the banks of the administration’s commitment to reducing regulation and reminded them that increased regulation did not stop three bank failures in 2023.
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