The same community banks that Washington spent fifteen years strangling with regulation are now being asked to help expose the financial networks propping up illegal immigration, and the Trump administration is making the case that the two goals are inseparable.
Treasury Secretary Scott Bessent brought that argument to Phoenix Thursday, appearing alongside Comptroller of the Currency Jonathan Gould at an Arizona Bankers Association roundtable, pairing a pitch for deregulation with a blunt warning about the criminal financial networks tied to the border.
Bessent was direct about who created the problem Arizona now faces.
“President Trump has taken historic action to seal our southern border. Still, Arizona remains uniquely exposed to the aftershocks of Biden’s border crisis, including cartels and criminal organizations that seek to conceal illicit proceeds within legitimate channels.”
The administration’s effort stems from President Donald Trump’s May executive order directing federal banking regulators to address financial risks associated with immigrants who lack authorization to work in the United States. Treasury’s Financial Crimes Enforcement Network (FinCEN) and other banking regulators followed with advisories and guidance in June.
FinCEN’s advisory was aimed at helping financial institutions spot schemes involving unlawful employment, labor brokers, shell companies, payroll tax evasion, identity theft and financial exploitation. The Office of the Comptroller of the Currency (OCC) has also instructed banks to account for the credit risks involved when lending to borrowers who are not legally authorized to work in the country.
Bessent made clear that the administration is not asking bank employees to become immigration agents.
“We do not ask bankers to assume the burdens of border enforcement. But we depend on banks to do what you do best: know your customers, identify risks as they arise, and report suspicious patterns before they metastasize into criminal schemes. “
That could make community banks particularly useful. According to Bessent, community banks hold only 15 percent of banking industry assets and deposits but account for 40 percent of small-business loans. Their local presence, he argued, gives them a better chance of recognizing transactions that do not fit the normal course of business in their communities.
Gould similarly described banks as part of the effort to protect the financial system from the consequences of illegal immigration and criminal activity.
As Secretary Bessent has said, economic security is national security. Banks have an important role to play. They need to know their customers, understand the risks they face, and make sound decisions based on the facts of each relationship.
Not everyone in the banking industry is fully on board. The Independent Community Bankers of America (ICBA) and 34 state banking associations urged FinCEN last month to ensure the order doesn’t pile new compliance costs onto smaller institutions. ICBA has argued that community banks already run extensive Bank Secrecy Act programs, and notably, it pushed back hard enough that the final order stopped short of requiring banks to collect citizenship information from customers. That was a significant win for smaller institutions.
Bessent paired the administration’s request for greater vigilance with a promise to continue rolling back regulations on community banks. He said half of America’s community and small banks have disappeared since the financial crisis while the regulatory system still failed to prevent three of the largest bank failures in U.S. history in 2023.
Dodd-Frank was supposed to end “too big to fail.” Instead, it created “too small to succeed.”
The OCC said its current approach is to focus supervision on material financial risks rather than requirements that do little to improve bank safety and soundness. Gould argued that a broader Main Street recovery depends on strengthening the country’s smaller banks.
The broader argument Bessent is making is that deregulation and border security aren’t separate agendas; they’re two sides of the same coin. Washington spent fifteen years weakening the community banks that know their customers best, while the open-border policies of the Biden era allowed criminal networks to embed themselves in legitimate financial channels. Fixing one without the other doesn’t work. The Trump administration is now trying to do both at once.
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