Banks Warned About Payroll Schemes Tied to Unauthorized Workers

The US Treasury Department is urging financial institutions to detect and report illicit activity related to the employment of workers who are in the US illegally.

The advisory issued Friday by Treasury’s Financial Crimes Enforcement Network highlights how employers can gain an unfair advantage by hiring and exploiting undocumented workers, facilitating identity theft, tax evasion, and the financing of criminal organizations. It describes schemes where complicit employers use shell companies and labor brokers to pay workers off-the-books without withholding taxes.

One payroll scheme employing workers who lacked documentation cost the US over $38 million, according to the guidance. Financial institutions ...