The Treasury Department is moving to crack down on illegal immigrant labor, urging banks to blow the whistle on accounts tied to payroll fraud schemes.
A Treasury advisory obtained by The Post lays out red flags showing illegal employment schemes — and exhorts banks to report employers who hire or exploit unauthorized workers to Immigration and Customs Enforcement.
Banks already smell the rot. They reported more than $2.5 billion in suspicious activity from payroll tax-fraud schemes in 2025, according to the advisory, which was set to be published Friday.
The 12-page document zeroes in on payroll tax fraud schemes that complicit employers and labor brokers run through shell companies.
“Through these schemes, employers can gain an unfair advantage over legitimate US businesses; depress wages; facilitate identity theft of people who are authorized to work in the United States, including American citizens; and steal millions of dollars in Federal and state payroll tax revenue meant for government benefit programs,” Treasury stated.
The advisory, from Treasury’s Financial Crimes Enforcement Network, carries out President Trump’s May 19 executive order that pulls banks into his fight against employers and illegal immigrants who game the financial system.
The document exposes how bosses in agriculture, construction, hospitality and domestic service hide their hiring of unauthorized workers — and how the cash flows through banks.
Citing the IRS, Treasury said the grift starts with an employer hiring a labor broker who sets up a shell company with a fake name like ABC Construction or XYZ Logistics. The broker then opens a bank account with a foreign passport or Individual Taxpayer Identification Number, deposits checks for phantom services, then cashes out or cuts small checks to pay workers off the books — and dodges every payroll tax.
Brokers pocket 4% to 10% of the illicit proceeds and identity theft powers the scheme, according to Treasury.
Unauthorized workers buy or steal Social Security numbers from citizens and legal residents to beat hiring checks, the advisory states.
Earlier this year, two Honduran nationals were sentenced for one such scheme, Treasury noted. Iris Villafranca and Osman Donaldo Zapata ran a years-long cash-payroll racket that cost taxpayers more than $38 million, drawing sentences of 17 years and four years, respectively.
Their shells deposited roughly $89 million in checks from construction subcontractors and let contractors pay workers off the books, the Justice Department said.
The advisory lists 18 red flags for banks to monitor.
They include a self-described “laborer” who opens an Individual Taxpayer Identification Number account, or ITIN, pulls in floods of checks from multiple companies, then yanks out cash or writes dozens of small checks; a construction or staffing firm that rakes in revenue but reports almost no payroll; and any company under two years old with no online footprint that looks like a shell.
Treasury urged banks to file a suspicious activity report with the department when they spot trouble, and blow the whistle on bosses who hire or exploit unauthorized workers. Treasury encouraged financial institutions to bring their suspicions to ICE’s tip submission site, too.
The Financial Crimes Enforcement Network, or FinCEN, cautioned that no single red flag proves guilt and that customers’ personal characteristics do not create automatic risk — a nod to fair-lending rules when banks scrutinize ITIN holders, a group that includes legal residents and other tax filers without Social Security numbers.
FinCEN is the special Treasury bureau that tracks, deters, and investigates money laundering and other financial crimes by collecting data on cash transactions, suspicious activity, and business ownership.
While not legally binding, ignoring its advisories can be highly dangerous for a bank’s regulatory standing, triggering reputation-shredding probes and penalties.
Treasury hit New York-based investment bank Canaccord Genuity with a record $80 million civil fine in March for failing to monitor suspicious trading.
The advisory comes as the latest strike in Trump’s immigration offensive.
He declared a national emergency at the southern border on day one of his second term and ordered agencies to block work permits for unauthorized immigrants. FinCEN issued an alert in November on cross-border money transfers tied to illegal immigration.
“President Trump has done more than anyone in history to secure our nation’s borders. Part of that effort includes securing our financial system,” Treasury Secretary Scott Bessent said in a statement.
“This administration will not allow illegal aliens to abuse financial institutions to steal billions of dollars from hardworking American taxpayers.”
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