On May 19, 2026, President Trump signed into law Executive Order 14406, titled Restoring Integrity to America’s Financial System, as published in the Federal Register on May 22, 2026 (the “EO”)

• Given the effects of the EO, major know-your-customer and anti-money laundering (“KYC/AML”) overhauls are foreseen, so banks should prepare for stricter customer due diligence rules targeting undocumented account holders.

• The U.S. Department of the Treasury (“Treasury”) will issue by July 18, 2026, a formal Advisory listing specific red flags and typologies for payroll fraud, off-the-books wages, and cross-border illicit transfers.

• The Bank Secrecy Act (“BSA”) regulations will be strengthened under the EO by: (i) August 17, 2026, authorizing banks to collect immigration status information when risk indicators warrant it, and (ii) November 15, 2026, the Treasury and the appropriate federal functional financial regulators shall consider changes to strengthen risk-based customer identification program requirements, taking into account the risks foreign consular identification cards pose to the integrity of the U.S. financial system.

• The Consumer Financial Protection Bureau (“CFPB”) shall consider by July 18, 2026, whether deportation risk and loss of wages qualify as ability-to-repay factors regarding its regulation on the eligibility of individuals to obtain consumer credit transactions secured by dwellings.

• The use of an individual taxpayer identification number (“ITIN”) by non-US persons, for identification purposes to obtain credit products or depository accounts, may be flagged as an enhanced due diligence trigger.

• By July 18, 2026, all four federal functional regulators (the Board of Governors of the Federal Reserve [“Fed”], the Office of the Comptroller of the Currency [“OCC”], the Federal Deposit Insurance Corporation [“FDIC”], and the National Credit Union Administration [“NCUA”]) shall issue credit risk guidance on lending to non-work-authorized borrowers.

I. Analysis.

I.1. Background and scope.

Executive Order 14406 frames immigration-related financial activity as a national security and systemic banking risk. The EO specifically references fentanyl-related financial flows tied to Mexico-based cartels, Chinese money laundering networks using U.S.-based accounts, and the structural ability-to-repay risk of extending credit to undocumented borrowers.

It directs the Fed, OCC, FDIC, and NCUA as all 4 federal functional regulators, the Treasury and the CFPB to take coordinated action within defined deadlines, including regulation changes.

I.2. Enhanced KYC/AML obligations.

The most immediate compliance impact falls on BSA-covered financial institutions. The Advisory to be issued from Treasury by July 18, 2026, will introduce specific red-flag typologies that compliance teams should incorporate into their reporting programs and transaction monitoring systems. The six categories of concern are:

• Payroll tax evasion by employers using non-work-authorized workers (failure to withhold/remit federal employment taxes).

• Use of foreign identity documents, nominee accounts, shell companies, or funnel structures to conceal beneficial ownership or disguise payroll flows.

• Routing of off-the-books wages through unregistered money services businesses (“MSBs”), third-party payment processors, or peer-to-peer platforms.

• Structuring and micro-structuring: repetitive, sub-threshold cash transactions correlated with payroll cycles.

• Financial patterns indicative of labor trafficking or forced labor, including mixing proceeds with legitimate business revenue.

• ITIN-based account opening or credit applications where the holder lacks verified lawful immigration status, triggering enhanced due diligence obligations.

However, the customer due diligence rulemaking expected to be issued by August 17, 2026 is the most structurally significant change. As of today, the Treasury’s Financial Crimes Enforcement Network current CDD rules only require beneficial ownership information but do not mandate collection of immigration status data. The proposed changes would authorize, and in some cases require, institutions to obtain immigration status and work authorization information as part of a risk-based CDD program when other indicators raise compliance concerns.

Similarly, the regulations of the BSA regarding the customer identification program will be reviewed by November 16, 2026, to specifically address the risk profile of foreign consular identification cards.

I.3. Credit risk and the ability to repay.

• Likewise, the EO directs CFPB to consider amending its regulations to explicitly recognize that deportation risk and the associated loss of wages constitute material factors in an ability-to-repay analysis for mortgage and consumer credit. If the CFPB acts on this directive, lenders extending credit to ITIN holders or non-work-authorized borrowers would need to document how this risk was assessed in underwriting.

I.4. Implications.

For financial institutions and businesses with U.S.–Mexico cross-border exposure, the EO carries immediate action from their U.S. counterparties:

• Heightened scrutiny of low-dollar remittance transfers to Mexico, which the EO characterizes as a vector for cartel-related flows;

• Likely increases in suspicious activity report filings on cross-border wires involving ITIN-linked accounts; and

• Potential de-risking pressure on MSBs and payment processors operating in the U.S.–Mexico corridor.

II. Transitory Regime.

Finally, the EO is effective the same day of its signing, i.e. May 19, 2026; therefore, the expressed timelines therein are constructed as follows:

• Day 0: May 19, 2026. Executive Order 14406 is signed and effective.

• Day 0 + 60: July 18, 2026. (i) Treasury issues formal Advisory with red-flag typologies, (ii) CFPB considers regulatory ability-to-repay guidance, (iii) Fed, OCC, FDIC, and NCUA issue credit risk guidance on lending to non-work-authorized borrowers.

• Day 0 + 90: August 17, 2026. Treasury proposes BSA CDD rule amendments to require, where risk warranted, collection of immigration status and work-authorization information.

• Day 0 + 180: November 15, 2026. Treasury and federal regulators consider BSA customer identification program rule changes, including new risk treatment for foreign consular identification documents.

If you have any questions concerning the scope or implementation of this article, please contact us.

Bernardo Mendoza
Partner
bmendoza@k-g.com.mx

Dorothy Lerch
Counsel
dlerch@k-g.com.mx

Karla P. de la Torre
Associate
kdelatorre@k-g.com.mx

Gerardo H. Estrada
Attorney
gestrada@k-g.com.mx