A June 5 joint advisory calls on financial institutions to be on the lookout for and report suspicious activity related to payroll tax fraud and the employment of non-work-authorized individuals. (FIN-2026-A002, 6/5/2026)
Treasury’s Financial Crimes Enforcement Network (FinCEN) issued the advisory, in coordination with the IRS, along with the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the National Credit Union Administration.
The advisory is part of a “whole-of-government effort to address the risks associated with the exploitation of the U.S. financial system by non-work authorized populations and their employers.” It aligns with Executive Order 14406, Restoring Integrity to America’s Financial System, issued May 19, which specifically calls out payroll tax evasion as a risk to the U.S. financial system.
The advisory instructs banks and other institutions to look for indicators of “off-the-books” payroll arrangements used to hire and conceal non-work-authorized workers. Treasury says employers engaged in these practices gain an unfair advantage over legitimate businesses, evade taxes, depress wages, and facilitate identity theft.
The advisory also provides instructions for reporting suspected unlawful work arrangements to FinCEN via a Suspicious Activity Report (SAR).
Payroll Tax Evasion
The advisory indicates that employers — particularly in the agriculture, construction, domestic service, and hospitality industries — hire, conceal, and sometimes exploit non-work-authorized workers.
Some employers do so by contracting with labor brokers who establish shell companies to create the appearance of a legitimate business, the advisory explains. These shell companies, often operating as unregistered money services businesses, then pay workers using cash, checks, or peer-to-peer platforms. Payment transactions are often designed to fall below Bank Secrecy Act and recordkeeping thresholds, per the advisory.
According to FinCEN, these schemes contribute to a significant tax gap. In 2025 alone, financial institutions reported over $2.5 billion in suspicious activity associated with payroll tax fraud schemes.
ITINs Identified as Risk Factor
The advisory advises caution around users of Individual Taxpayer Identification Numbers, or ITINs. These are issued by the IRS to individuals who are not eligible to obtain a Social Security number, but they do not authorize employment in the United States.
While acknowledging that ITINs “facilitate tax compliance,” the advisory encourages banks to “assess whether the use of an ITIN may be a relevant risk factor” when presented in lieu of a Social Security number or valid employment authorization to open an account or obtain credit. This assessment should be part of a bank’s risk-based procedures for customer due diligence to ensure accounts are not being used to facilitate unlawful employment, per the advisory.
Other Financial Red Flags
The advisory provides a total of 18 red flag indicators to help financial institutions identify potential payroll tax fraud and employment of non-work-authorized individuals. Key indicators include individuals with Social Security number mismatches and those who open an account with a non-U.S. passport or ITIN and claim to be self-employed or operating a small business.
The guidance also calls for vigilance when customers are in or involved with companies in the agriculture, construction, domestic service, hospitality, or staffing industries.
Other red flags include businesses issuing large volumes of recurring checks for under $1,000 payable to separate individuals and businesses conducting large or unusual volumes of cash withdrawals or negotiating checks for cash.
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