By David Lawder
LE SUEUR, Minnesota, Jan 9 (Reuters) - The U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) has notified some money services businesses they are under investigation
for alleged fraud as part of a crackdown on federal social benefits abuses in Minnesota, Treasury Secretary Scott Bessent said on Friday.
Bessent also told a virtual news conference that some banks in the state involved in money transfer transactions were being audited by the Internal Revenue Service Civil Enforcement Division for alleged money laundering activities.
He declined to identify the banks and money services firms being scrutinized, but said the U.S. government was determined to get to the bottom of alleged social services fraud schemes in Minnesota that he said had diverted billions of dollars intended for social welfare programs. Bessent said some funds may have "potentially been diverted" to the al Shabaab terrorist group in Somalia, but declined to provide specific evidence.
"We have traced where the money went and are examining it," Bessent told reporters after meeting with several financial institutions in the Minneapolis-St. Paul area.
Bessent said FinCEN has issued a geographic order increasing scrutiny on banks and money transmitters in Hennepin and Ramsey counties in Minnesota -- covering both Minneapolis and St. Paul. This will require firms to report additional information on funds transferred outside of the U.S., including FinCEN reports on transactions above $3,000.
IRS TO FORM TASK FORCE
The IRS will also form a task force to investigate nonprofit groups on their handling of pandemic-era tax incentive programs, the Treasury chief said.
Bessent described the welfare fraud situation in Minnesota as "out of control" and blamed Democratic Governor Tim Walz for the problems, adding the Treasury was scrutinizing his role.
"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," Bessent said. "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."
Walz has referred to the fraud scandal as a crisis and criticized Trump and other Republicans for what he called bad-faith attacks on him.
(Reporting by David Lawder in Le Sueur, Minnesota, Andrea Shalal and Susan Heavey in Washington; Editing by Rod Nickel)
