U.S. Treasury Targets Minnesota Money Transfer Firms in Social Benefits Fraud Probe

On the 9th of January, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has informed four money transfer companies that they are under federal investigation for alleged fraud, part of a broader crackdown on abuses of social benefits in Minnesota, Treasury Secretary Scott Bessent announced Friday. Speaking at a virtual news conference, Bessent also revealed that several banks in the state involved in money transfer operations are being audited by the Internal Revenue Service Civil Enforcement Division over potential money laundering activities.

Bessent did not disclose the names of the banks or money services businesses under scrutiny but stressed that the federal government is committed to uncovering alleged schemes that have diverted billions of dollars intended for social welfare programs. The Treasury Secretary suggested that some of these funds may have “potentially been diverted” to the al Shabaab terrorist organization in Somalia, though he did not provide evidence to support the claim. “If you're sending money back to Somalia, then you're getting too much,” Bessent told Reuters during an interview in Minneapolis-St. Paul. “Or you're part of the scam, and we're going to track you down.”

He emphasized that the investigation is designed to avoid harming individuals who can prove that the funds they transfer did not originate from social service payments. Asked whether the audits could have a chilling effect on legitimate remittances sent by migrants to family members abroad, Bessent responded, “No, it shouldn't. Anyone who can prove where the money has come from … is fine.”

As part of the enforcement effort, FinCEN has issued a geographic order requiring heightened scrutiny of banks and money transmitters in Hennepin and Ramsey counties, encompassing Minneapolis and St. Paul. Under this directive, firms will be required to report additional details regarding transfers of funds outside the United States, including FinCEN reports for any transactions exceeding $3,000.

In addition, the IRS plans to establish a task force to investigate nonprofit organizations’ administration of pandemic-era tax incentive programs, according to Bessent. The Trump administration has previously targeted Minnesota Governor Tim Walz and the state’s large Somali American and Somali immigrant population over allegations that, dating back to 2020, some federally funded nonprofits managing childcare and other social services programs committed fraud.

Bessent accused Walz of failing in his oversight responsibilities, saying, “It's clear that Governor Walz has been negligent in his fiduciary duties as the chief executive of the state of Minnesota, that this would happen on his watch. And we are actively pursuing all leads to see the level of involvement, whether it's limited to just negligence and incompetence, or is something more than that.”

Governor Walz, who announced this week that he will not seek a third term, has described the fraud scandal as a crisis and has criticized Trump and other Republicans for what he characterized as bad-faith political attacks against him.

By fLEXI tEAM