US banks left guessing over scope of looming order on citizenship data

• Banks would need to overhaul IT systems and train staff to verify over 180 different visa types, with verification for existing customers deemed 'almost impossible' by executives
• The order could disproportionately impact lower-income Americans, as over 9% of voting-age citizens (21.3 million people) lack readily available proof of citizenship, and roughly half of Americans do not have passports
• Implementation faces major legal uncertainties, as it's unclear what statutory authority regulators could invoke, potentially opening the door to 'significant legal challenges' according to policy experts

Summary

Key Development:

U.S. banks face uncertainty over an expected White House executive order requiring them to collect citizenship and immigration status data on customers. Treasury Secretary Scott Bessent confirmed the administration is developing the order but provided no details, leaving the industry largely uninformed despite the directive's significant scope.

Financial Impact:

The Center-right American Action Forum estimates implementation costs between $2.6 billion and $5.6 billion annually for new accounts alone. Banks would need massive IT system overhauls, staff training to verify over 180 visa types, and new document processing capabilities.

Operational Challenges:

• Current know-your-customer regulations don't require citizenship verification
• Verifying existing customers deemed "almost impossible" by bank executives
• Over 9% of voting-age Americans (21.3 million people) lack readily available proof of citizenship
• Approximately 50% of Americans don't have passports
• Hundreds of millions of existing U.S. bank accounts would be affected

Market Implications:

• Banks likely to restrict online account opening
• Could disproportionately impact lower-income Americans and rural "banking deserts"
• Risk of millions becoming unbanked
• Major enforcement risks for banks over inadequate documentation verification
• Potential for "significant legal challenges" due to unclear statutory authority
• Industry groups initially opposed the measure but report minimal recent communication from administration

Broader Context:

The initiative represents another instance of the Trump administration leveraging financial institutions for policy goals, following January actions on credit card interest rate caps and pressure regarding alleged discrimination against conservatives.

Implementation would require Treasury or regulators to write new rules with public feedback periods, potentially allowing industry pushback.