Treasury takes aim at financial institutions in Minnesota in wake of alleged federal funding fraud

Financial institutions in Minnesota will face increased scrutiny by federal regulators in the wake of alleged fraud in the state involving federal benefits, the Treasury said Friday.

In a statement, the Treasury Department said various units within the agency would be acting to increase scrutiny, which includes banks and money services businesses (MSBs). Those include:

• The agency’s Financial Crimes Enforcement Network (FinCEN) is investigating MSBs in the state, requesting information for “examination and investigative purposes under the Bank Secrecy Act.”
• The Internal Revenue Service (IRS) is auditing financial institutions that Treasury alleges facilitated laundering of Minnesota funds and “helping support criminal and civil enforcement efforts.” Treasury also said IRS will announce a new task force charged with investigating any fraud and abuse involving pandemic-era tax incentives and misuse of 501(c)(3) tax-exempt status by entities implicated in the Minnesota-based social services fraud schemes.
• A “geographic targeting order” has been issued by FinCEN requiring banks and money transmitters located in Hennepin and Ramsey Counties (which include the cities of Minneapolis and St. Paul) to report additional information about funds transferred outside of the United States. Treasury said those businesses will be required to file reports with FinCEN above certain transactions of $3,000 or more where the beneficiary is located outside of the United States.
• FinCEN has also urged financial institutions through an “alert” to identify and report fraud associated with federal child nutrition programs. “These fraud rings have defrauded the U.S. government of at least $300 million meant for children in need in Minnesota, using fraud proceeds for their own personal enrichment in the United States and abroad. Treasury said the alert includes “red flags” to help financial institutions identify specific types of fraud and report the activity to law enforcement.

Secretary Bessent Announces Initiatives to Combat Rampant Fraud in Minnesota