Scott Bessent launches crackdown on fraud after Somali scam scandal in Minnesota

Join Uncle Sam in the fight against billion-dollar financial fraud rings.

Treasury Secretary Scott Bessent is unveiling a new initiative on Monday that will compensate informants with up to 30% of the fines levied on criminals who are defrauding US taxpayers, as reported by The Post.

The program will cover tips related to Medicaid and Medicare scams, with an estimated $70 billion per year lost to fraud in these programs alone, making whistleblowers eligible for substantial rewards.

Various other forms of financial crimes will also fall under the program.

This initiative follows Bessent’s visit to Minnesota in January, where Somali immigrants were accused of orchestrating elaborate schemes to defraud government welfare programs, allegedly siphoning off at least $9 billion since 2018.

The rewards will be funded through fines imposed on criminals, rather than burdening American taxpayers, based on confidential Treasury documents obtained by The Post.

“Individuals in the US or abroad who provide information may be eligible for rewards if their tips lead to successful enforcement actions resulting in monetary penalties exceeding $1,000,000,” states one of the documents.

This program is modeled after a similar initiative managed by the Internal Revenue Service, which falls under the Treasury Department’s jurisdiction.

The 63-year-old former hedge fund manager’s plan involves compensating informants with 10-30% of the proceeds when fines exceed $1 million.

This move by the Treasury Department aligns with an executive order signed by President Trump in March 2025, signaling a government-wide crackdown on such fraudulent activities.

Vice President JD Vance recently convened the inaugural meeting of an anti-fraud task force, part of the administration’s efforts to combat abuse of social programs.

An internal memo obtained by The Post indicates that Bessent will also issue a warning to US banks, alerting them to the recruitment of foreign nationals by sophisticated fraudsters to exploit federal social programs.

Federal investigators are currently examining how Somali scammers in Minnesota established fake autism clinics, fraudulent food distribution centers, and fictitious housing services, using “straw owners” to channel taxpayer funds to overseas real estate and possibly to terrorist organizations like Al-Shabaab.

“Our citizens deserve to know that their tax dollars are not funding acts of global terror or luxury lifestyles for fraudsters,” a Treasury official briefed on the matter told The Post.

One scam in Minnesota, involving a group known as Feeding Our Future, resulted in $250 million being diverted from funds intended for hungry children, with the money instead spent on luxury items and properties overseas, according to prosecutors.

With the exception of the ringleader, almost all participants in the scam are of Somali descent.

The Financial Crimes Enforcement Network, tasked with tracking illicit financial activities within the Treasury, will issue an advisory on Monday advising banks to be vigilant in identifying and reporting suspicious transactions related to healthcare fraud.

Financial institutions are required to file Suspicious Activity Reports (SARs) under the Bank Secrecy Act with the specialized unit whenever they suspect money laundering or fraud.

Any attempts to conceal, transfer, or launder stolen funds violate the country’s primary anti-money laundering legislation.

The leaked advisory, serving as an early warning system for US banks, outlines how criminals obtain patient IDs through bribery and identity theft, submit false claims for non-existent treatments, and then launder the proceeds through wire transfers and cryptocurrency or spend it on luxury goods.

“Health care fraud, along with government benefits fraud, remains one of the largest sources of illicit proceeds in the US,” states the document set to be released on Monday, noting a significant increase in healthcare fraud since the COVID-19 pandemic.

The Treasury Department warns that allowing fraudulent healthcare claims to persist ultimately burdens hardworking Americans.

“These schemes jeopardize the integrity of both the US healthcare and financial systems, impose substantial costs on taxpayers, deplete resources for program beneficiaries, and drive up healthcare costs in the US,” the 18-page advisory emphasizes.

The scam typically involves “straw owners,” often immigrants or retired doctors whose identities have been stolen, establishing sham companies posing as legitimate providers of medical services like wheelchairs, home care, lab tests, medications, or adult day care.

Common tactics include billing for services never rendered, charging for unnecessary treatments, or falsifying records to inflate costs. Bribes and kickbacks are often used to involve complicit medical professionals in the fraud.

Once the government disburses funds, the scammers transfer the money abroad, making recovery efforts by authorities more challenging, according to sources.

Last year, the Justice Department brought criminal charges against 324 defendants in a $10 billion healthcare fraud case as part of Operation Gold Rush, which dismantled a Russian-backed crime syndicate accused of submitting false claims to Medicare through legitimate medical supply companies.

A 2022 study by the Colorado State University Global White Collar Crime Task Force estimates that Medicaid and Medicare fraud collectively cost at least $68.7 billion annually.

The confidential Treasury advisory to banks outlines 24 “red flags” for financial institutions to watch for, such as claims submitted by individuals without US residency, sudden spikes in billing from recently established medical companies, or large transfers to overseas entities following government deposits.

While not legally binding, disregarding such advisories can jeopardize a bank’s regulatory compliance, leading to investigations and penalties that damage its reputation.

Just three weeks ago, the Treasury imposed a record $80 million civil penalty on New York-based investment bank Canaccord Genuity for failing to monitor suspicious trading activities.

Between 2019 and ⁠2022, Canaccord allegedly neglected to file at least 160 suspicious activity reports on thousands of questionable transactions, with some flagged activities left unreviewed for extended periods.

The allegations against Canaccord were unrelated to healthcare fraud but focused on a Cyprus-based firm that aided Russian oligarchs in transferring funds out of Russia.