The Home Office is sharing the details of known illegal migrants with anti-fraud organisation, Cifas.
Once a bank or building society finds a current account that is being used by an illegal migrant, the Home Office will double check the details and the lender could be asked to close the account.
The government confirms it will only be sharing details of illegal migrants who are due to be deported from the UK or for those who have absconded from immigration control. It said: “we consider these individuals should be denied access to banking services”.
Minister for Immigration, Caroline Nokes, said: “These new measures are part of our commitment to make it more difficult for people with no right to live or work in the UK to remain here.
“This will not affect those who are in the UK legally but we must be firm with those who break the rules as illegal immigration impacts the whole of society. Those living and working in the UK illegally can drive down the wages of lawful workers, allow rogue employers to undercut legitimate businesses and put pressure on taxpayer-funded public services.
“By tackling abuse in this way, we can build an immigration system which works in the best interests of the country and prevents vulnerable people from finding themselves at risk of exploitation.
Powers to stop illegal migrants opening new current accounts were introduced three years ago.