FinCEN Issues 18-Flag Advisory on Unlawful Employment, Urging ITIN Due Diligence
Updated
Updated · Perkins Coie · Jun 23
FinCEN Issues 18-Flag Advisory on Unlawful Employment, Urging ITIN Due Diligence
1 articles · Updated · Perkins Coie · Jun 23
Summary
June 5’s joint FinCEN advisory with the FDIC, OCC and NCUA tells banks and money-services businesses to watch for unlawful-employment schemes, adding 18 red flags and a new SAR term, “FINANCIALINTEGRITY-2026-A002.”
The guidance centers on payroll fraud and identity-theft schemes in which labor brokers use shell companies, ITINs or foreign IDs, and structured payments to hide unauthorized workers and evade taxes.
ITINs are the advisory’s biggest compliance shift: FinCEN says using an ITIN instead of a Social Security number should trigger enhanced due diligence, potentially forcing institutions to reassess existing customer risk profiles.
FinCEN said financial institutions reported more than $2.5 billion in suspicious activity tied to payroll-tax fraud in 2025; the IRS has put the broader employment-tax gap at $127 billion for 2022.
The advisory ties these typologies to five AML/CFT national priorities and signals tougher supervisory expectations, while raising industry concerns over defensive SAR filing, de-risking and possible discrimination against lawful customers.
How can banks increase scrutiny on certain customers without being accused of illegal discrimination?
With new rules targeting foreign cartels, why are enforcement task forces mainly pursuing domestic drug cases?
FinCEN Flags $2.5 Billion in Payroll Fraud: New 2026 Crackdown on Unlawful Employment and ITIN-Linked Risks
Overview
In June 2026, FinCEN, working with federal banking agencies and the IRS, issued a major advisory urging financial institutions to step up efforts against fraud schemes tied to the unlawful employment of people without work authorization. This move is part of a broader government initiative under President Trump’s Executive Order 14406, which was issued in May 2026 to strengthen risk-based customer due diligence and address financial risks from unauthorized employment. The advisory highlights the need for banks to improve detection and reporting of suspicious activities, reflecting a coordinated push to protect the integrity of the U.S. financial system.