FinCEN, FDIC, OCC, and NCUA issue joint advisory on unlawful employment of noncitizens

Federal regulators recently issued a joint advisory regarding the movement of funds linked to the employment of individuals without work authorization. FinCEN, the FDIC, the OCC, and the NCUA now highlight how banks can identify and report potential fraud tied to the Immigration Reform and Control Act of 1986. The guidance outlines two primary ways these schemes occur: identity theft and payroll fraud.

Identity theft in this context involves using stolen personally identifiable information to pass Form I-9 checks, allowing individuals to open accounts and move wages. Payroll fraud often involves labor brokers or shell companies that obscure payments through irregular methods, such as cash couriers or peer-to-peer platforms, to bypass tax withholding and transaction monitoring. The advisory provides 18 specific red flags to help institutions spot these activities.

Key indicators include accounts opened with ITINs by individuals claiming to operate businesses in industries like construction or hospitality when those accounts show unusual cash movement patterns. For corporate customers, red flags include high transaction volume with zero corresponding payroll activity or the issuance of recurring, low-dollar checks to large groups of individuals who frequently cash them out immediately.

Financial institutions are encouraged to integrate these red flags into their existing due diligence processes. When filing a Suspicious Activity Report related to this advisory, banks should include the code FINANCIALINTEGRITY-2026-A002. This move aligns with a broader federal effort to combat fraud, which is currently a national priority for FinCEN and other regulatory bodies.

Compliance teams should review internal policies against these updated typologies. While this advisory focuses on detection and reporting, it serves as a warning of increased scrutiny regarding how financial networks are used to move illicit wages. Institutions should ensure their customer identification and monitoring systems are calibrated to detect these specific behavioral patterns.