Executive Order 14406, issued on May 19, 2026, aims to restore integrity to America's financial system by addressing risks posed by illicit financial activity and the extension of credit to non-work authorized populations. It mandates several actions from federal agencies to strengthen financial safeguards and mitigate structural risks.
Executive Order 14406 of May 19, 2026 - Restoring Integrity to America’s Financial System
Purpose and Policy
- The Executive Order emphasizes the critical role of financial institutions in safeguarding against fraud and abuse, while also acknowledging the Administration's efforts to reduce burdensome regulations.
- It establishes a policy to adopt tailored measures to protect the financial system from illicit use and promote sound lending practices, specifically targeting national security and public safety risks from illicit cross-border financial activity.
- The Order highlights significant threats, including the use of low-dollar cross-border transfers for terrorist financing, narcotics, human trafficking, and the laundering of over $312 billion by foreign passport holders through U.S. accounts for criminal organizations.
- It identifies structural risks posed by extending credit (e.g., mortgage, auto loans, credit cards) to inadmissible and removable alien populations due to potential wage loss, and notes vulnerabilities from employers violating immigration law through underreported wages or improper tax withholding.
Definitions
- The term "Federal functional financial regulator" is defined to include the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the National Credit Union Administration.
Safeguarding Against Fraud and Abuse (Compliance Requirements)
- Treasury Advisory on Risks:
- Within 60 days of May 19, 2026 (by July 18, 2026), the Secretary of the Treasury shall issue a formal Advisory to financial institutions.
- This Advisory will detail specific red flags and typologies associated with suspicious activities, including payroll tax evasion by employers of non-work authorized individuals, use of foreign-identity documents or complex structures to obfuscate beneficial ownership, and utilization of unregistered money services businesses or peer-to-peer platforms for "off-the-books" wage payments.
- It will also cover patterns of structuring/micro-structuring cash transactions, financial activity indicative of labor trafficking, and the use of Individual Taxpayer Identification Numbers (ITINs) for credit products or accounts by applicants lacking verified lawful immigration status, which may require enhanced due diligence.
- Strengthening Bank Secrecy Act (BSA) Due Diligence:
- Within 90 days of May 19, 2026 (by August 17, 2026), the Secretary of the Treasury, in consultation with Federal functional financial regulators, shall propose changes to BSA implementing regulations.
- These changes are intended to strengthen risk-based customer due diligence requirements, ensuring institutions collect and verify sufficient identity information for nominal and beneficial owners to assess risks related to illicit finance, sanctions evasion, and fraud.
- Institutions must maintain authority to obtain additional information, including lawful immigration status and employment authorization, when relevant to assessing risks like fraud or illicit financial activity.
- Strengthening Customer Identification Program (CIP) Requirements:
- Within 180 days of May 19, 2026 (by November 15, 2026), the Secretary of the Treasury and Federal functional financial regulators shall consider changes to BSA implementing regulations.
- These changes will aim to strengthen risk-based customer identification program requirements for covered financial institutions, specifically accounting for risks posed by foreign consular identification cards to the integrity of the U.S. financial system.
Addressing Structural Credit Risks (Compliance Requirements)
- CFPB Clarification on Ability-to-Repay:
- Within 60 days of May 19, 2026 (by July 18, 2026), the Consumer Financial Protection Bureau (CFPB) shall consider clarifying that potential deportation and loss of wages are factors that could adversely affect a non-work authorized borrower’s ability to repay credit under 12 CFR Part 1026.
- This clarification would allow lenders to consider such factors in their reasonable and good-faith underwriting determinations.
- Federal Functional Financial Regulator Guidance:
- Within 60 days of May 19, 2026 (by July 18, 2026), each appropriate Federal functional financial regulator shall issue guidance regarding the management of potential credit risks posed by the non-work authorized population.
General Provisions
- The Order clarifies that it does not impair existing legal authority of executive departments or agencies, nor the functions of the Office of Management and Budget.
- Implementation is subject to applicable law and the availability of appropriations, and the Order does not create any enforceable rights or benefits.
- The Department of the Treasury will bear the costs for the publication of this Order.