Treasury Announces Investigations, Reporting Requirements and Task Force to Address Somali-Linked Fraud in Minnesota

In this context, “Somali fraud” is the label the Treasury and some officials are using for a set of large, mostly Minnesota‑based government‑benefits fraud schemes in which many defendants happen to be of Somali descent. The core criminal conduct is not about ethnicity; it’s about:

• Stealing money from federal and state social‑service programs, especially child nutrition programs funded by USDA and administered in Minnesota (for example, the “Feeding Our Future” case), by claiming to serve tens of thousands of meals that were never provided.
• Using shell companies and nonprofits to submit fake invoices and enrollment records, inflate meal counts, or hide that the same people controlled both the sponsor and the sites being paid.
• Laundering the proceeds through banks and money‑service businesses, then spending the money on real estate, luxury cars, jewelry, international travel, and other personal expenses, and in some cases wiring funds abroad (including to East Africa and the Middle East).

Treasury’s Jan. 9 and Jan. 13 releases describe this as “rampant government benefits fraud” and “Somali fraud rings” that stole at least hundreds of millions of dollars; DOJ and IRS criminal filings in the Feeding Our Future case, and Minnesota prosecutors, describe essentially the same conduct (wire fraud, money laundering, bribery, false claims) in detail.

According to Treasury’s own description of the Minnesota crackdown, the main Treasury components involved are:

• FinCEN (Financial Crimes Enforcement Network): Issued four notices of investigation to Minnesota money‑services businesses, issued the Geographic Targeting Order (GTO) on certain international transfers from Hennepin and Ramsey counties, and released the national alert on child‑nutrition‑program fraud.
• IRS (Internal Revenue Service) civil enforcement and Criminal Investigation (CI): Conducting audits of financial institutions that “facilitated the laundering of Minnesota funds” and helping support criminal and civil enforcement; IRS‑CI has led many of the Feeding Our Future criminal investigations.
• Treasury leadership and Terrorism and Financial Intelligence (TFI) policy side: While not named bureau‑by‑bureau, Bessent says “all entities in the administration” and Treasury will “follow the money” and track potential flows to the Middle East and East Africa, which typically involves TFI and its offices working with FinCEN and law enforcement.

No public statement yet assigns a formal lead role to OFAC; the focus so far is BSA/AML enforcement (FinCEN) and tax/enforcement (IRS), coordinated by the Secretary’s office.

A Geographic Targeting Order (GTO) is a temporary order that FinCEN can issue under the Bank Secrecy Act to financial institutions in a specific area, forcing them to collect and report extra information on certain transactions above a chosen dollar amount, beyond normal anti‑money‑laundering reporting.

In the Minnesota fraud crackdown, FinCEN’s GTO:

• Applies to banks and money transmitters in Hennepin and Ramsey Counties (Minneapolis–St. Paul).
• Requires them to file reports to FinCEN for international funds transfers of $3,000 or more where the beneficiary is outside the United States.

The goal is to give law enforcement more detail on who abroad is receiving suspected fraud proceeds so they can speed up prosecutions and asset recovery.

Treasury says IRS civil enforcement is “auditing financial institutions that facilitated the laundering of Minnesota funds.” In practical terms, that usually means:

• Reviewing banks’ and credit unions’ compliance with tax and Bank Secrecy Act rules (customer due diligence, suspicious activity reporting, record‑keeping).
• Examining specific accounts and transactions tied to known fraud schemes to see if institutions failed to detect or report suspicious activity, and whether any income was misreported for tax purposes.

Effects on customers and banks:

• Ordinary customers are not targeted; the focus is on institutions and accounts linked to suspected fraud or money‑laundering rings.
• Banks could face penalties, remedial orders, or referrals for criminal investigation if IRS finds serious failures; they may tighten their controls, which can mean more questions, delayed wires (especially international transfers), or account closures for customers whose activity is assessed as high‑risk.

No public document lists the specific banks under IRS audit or the precise corrective actions yet.

Secretary Bessent has announced that the administration will offer cash rewards to whistleblowers who provide information about Minnesota fraud schemes, saying, “If these fraudsters want to turn on each other, we welcome that. We will be offering cash rewards to whistleblowers.” However:

• Treasury has not yet published a formal schedule of reward percentages, caps, or detailed procedures specific to this Minnesota effort.
• In practice, tips can already be submitted through existing federal channels (such as Treasury and Inspector General “report fraud, waste, and abuse” portals or by contacting IRS Criminal Investigation), and Bessent’s comments indicate that people who supply actionable information in these Minnesota cases can expect monetary awards.

As of now, there is no publicly released Minnesota‑specific whistleblower claim form or rule beyond these statements.

Treasury and IRS have said only that “IRS civil enforcement … will soon announce the formation of a task force” to investigate fraud and abuse involving pandemic‑era tax incentives and misuse of 501(c)(3) tax‑exempt status by entities implicated in Minnesota‑based social‑services fraud schemes. Public information so far indicates:

• The task force will be housed within the IRS (likely within civil enforcement, coordinating with IRS Criminal Investigation and Treasury).
• Its scope is to examine how nonprofits and other entities may have abused pandemic‑related tax credits and their charitable status in connection with the Minnesota fraud networks, and to support related civil and criminal enforcement.
• No public documents yet name a specific individual leader (such as an executive‑level IRS official), nor do they specify a start date, end date, or detailed timeline.

So the existence and general mission of the task force are known, but its leadership and schedule have not been publicly defined.

Yes. Treasury’s actions are explicitly designed to generate evidence that could support criminal cases, and Secretary Bessent has said prosecutions may reach “whether they are in the Minnesota government or they are sitting in East Africa.” In practice:

• FinCEN investigations and the GTO will feed detailed transaction data to federal and state prosecutors, who can seek indictments for fraud, money laundering, conspiracy, tax crimes, or related offenses.
• IRS audits and the upcoming tax‑fraud task force can uncover tax evasion and improper use of nonprofit status, which may be referred for criminal prosecution.

If investigators believe a state official or service‑provider executive knowingly participated in or facilitated the schemes, the normal steps would be:

1. Financial‑intelligence analysis and audits (FinCEN/IRS/Treasury OIG and other Inspectors General).
2. Referral to the Department of Justice or state prosecutors.
3. Grand‑jury investigation, indictments, and then criminal trials or plea agreements.
4. Parallel civil actions, such as asset forfeiture and efforts to claw back misused funds.

So while no specific state official has been charged solely because of these new Treasury measures, the structures being put in place are meant to make such charges possible if evidence supports them.