U.S. Treasury Secretary Scott Bessent announced several initiatives in Minnesota aimed at addressing government benefits fraud. These actions are designed to strengthen the financial system and protect taxpayers. Secretary Bessent stated that the administration is focused on accountability for Minnesota residents, noting that welfare fraud has increased under Governor Tim Walz, with billions of dollars allegedly diverted from programs intended for vulnerable populations to fraud schemes.
While in the Twin Cities, Secretary Bessent met with financial institutions, individuals affected by fraud, state leaders, and community members. He also held a roundtable discussion to gather input from citizens and chaired a public-private partnership meeting with financial institutions and law enforcement to share information on identifying, reporting, and investigating government benefits fraud.
Complex fraud schemes in Minnesota have reportedly misappropriated billions of dollars from state programs. Perpetrators allegedly used these funds to purchase residential and commercial real estate, luxury goods, vehicles, planes, international flights, and other luxury expenses.
Actions by the U.S. Department of the Treasury
FinCEN Investigating Money Services Businesses in Minnesota
The Treasury's Financial Crimes Enforcement Network (FinCEN) has issued four notices of investigation to money services businesses (MSBs) located in Minnesota. These notices request information from these businesses, which provide financial services outside the formal banking system, for examination and investigative purposes under the Bank Secrecy Act.
IRS to Launch Fraud Task Force Targeting Misuse of Funding
The IRS civil enforcement division is auditing financial institutions that facilitated the laundering of Minnesota funds and is supporting criminal and civil enforcement efforts. The IRS plans to form a task force to investigate fraud and abuse involving pandemic-era tax incentives and the misuse of 501(c)(3) tax-exempt status by entities implicated in Minnesota-based social services fraud schemes. The Treasury is committed to preventing fraudulent nonprofits from misusing taxpayer funds.
Enhanced Reporting Can Accelerate Prosecutions and Recovery
FinCEN has issued a Geographic Targeting Order (GTO) requiring banks and money transmitters in Hennepin and Ramsey Counties (including Minneapolis and St. Paul) to report additional information about funds transferred outside of the United States. These businesses must now file reports with FinCEN for transactions of $3,000 or more where the beneficiary is located outside the U.S. This order is expected to provide law enforcement with more information to assist in investigations of government benefits fraud, advance prosecutions, and aid in the recovery of internationally laundered funds.
FinCEN Issues Alert on Child Nutrition Programs
FinCEN has issued an Alert to financial institutions, urging them to identify and report fraud associated with Federal child nutrition programs. These fraud schemes have reportedly defrauded the U.S. government of at least $300 million intended for children in Minnesota, with proceeds allegedly used for personal enrichment. The Alert includes "red flags" to help financial institutions identify specific types of fraud and report the activity to law enforcement.
Training Law Enforcement to Use Financial Data
FinCEN provided on-the-ground training for Minnesota-based Federal, state, and local law enforcement. The training focused on how to utilize financial data, such as Suspicious Activity Reports, to improve efforts against these fraud schemes.