The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an advisory for financial institutions about the risks of the unlawful employment of illegal aliens.
FinCEN said that hiring, concealing, and exploiting non-work authorized populations can give employers an unfair advantage over legitimate U.S. businesses, depress wages, facilitate identity theft of Americans, and steal tax revenue meant for government benefit programs. Further, schemes to pay unlawful workers often rely upon access to the U.S. financial system, including U.S. banks. Unlawfully obtained wages can be leveraged to facilitate the financing of transnational criminal organizations. Their global criminal enterprises may include drug trafficking, human trafficking, and other illicit activity in the United States.
FinCEN issued this Advisory jointly with the Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and National Credit Union Administration and in coordination with the Internal Revenue Service.
The advisory calls attention to identity theft and payroll fraud as key features in schemes by complicit employers in the agriculture, construction, domestic service, hospitality, and other industries to conceal violations of U.S. immigration laws.
Unlawful aliens can illicitly obtain Social Security numbers and other personally identifiable information of U.S. citizens and lawful permanent residents to gain unlawful employment and wages, employer- and government-provided health care benefits in the United States, and access to financial services.
Complicit employers can also use payroll tax fraud schemes to conceal their hiring of low-wage unlawful alien workers, as well as to evade taxes and workers’ compensation benefits. Last year, financial institutions reported over $2.5 billion in suspicious activity associated with these payroll tax fraud schemes.
In addition, FinCEN’s analysis highlights how complicit labor brokers may use a foreign identity document—such as a foreign passport—or an Individual Taxpayer Identification Number (ITIN) to open the account for the shell company at a bank. Complicit employers send checks to these shell companies for purported services or products related to their industry. The complicit labor broker then launders the funds and sends payments to the unlawful alien workers on behalf of the complicit employers.
The advisory encourages banks to consider the use of an ITIN when applying appropriate risk-based procedures for customer due diligence. Specifically, when an ITIN is presented in lieu of a Social Security number or valid employment authorization document to obtain credit products or open an account, banks are encouraged to assess whether the use of an ITIN may be a relevant risk factor.
Overall, the joint Advisory includes 18 red flag indicators to help financial institutions detect, prevent, and report suspicious activity connected to fraud schemes involving the unlawful employment of unlawful aliens.