The U.S. Treasury Department on Thursday launched a set of initiatives to investigate what it called “rampant government benefits fraud” in Minnesota, including the imposition of new reporting requirements for financial institutions. 

Under the plan, the department’s Financial Crimes Enforcement Network (FinCEN) has initiated additional investigations into the alleged scheme, and the Internal Revenue Service has created a new task force charged with fighting fraud and abuse involving pandemic-era tax incentives and misuse of 501(c)(3) status. 

FinCEN has separately published a new Geographic Targeting Order (GTO) requiring banks and money transmitters in Hennepin and Ramsey Counties, including Minneapolis and St. Paul, to retain and report records for certain transfers over $3,000 tied to recipients outside the United States.

In a statement, U.S. Treasury Secretary Scott Bessent claimed that the actions were taken after it was uncovered that “billions of dollars intended for feeding hungry children, housing disabled seniors, and providing services for children in need were diverted to benefit Somali fraud rings.” 

In response to the scandal, FinCEN has issued four notices of investigation to money services businesses in Minnesota and IRS civil enforcement is auditing financial institutions that facilitated laundering connected to the schemes. 

Under the GTO, banks and MSBs must report qualifying transfers where the originator provides an address in the covered counties, is not a publicly traded company on an SEC-regulated exchange, is not a financial institution subject to Bank Secrecy Act AML-program requirements, and the beneficiary or the receiving institution is located abroad. 

FinCEN also issued an alert urging financial institutions to watch for fraud tied to federal child nutrition programs, alleging such schemes have defrauded the U.S. government of at least $300 million in Minnesota, and said FinCEN provided training to local, state, and federal law enforcement on using financial data such as suspicious activity reports. 

Read more at the U.S. Treasury Department