As Minnesota navigates an investigation into multiple fraud allegations affecting its social services system, Treasurer Scott Bessent has raised concerns that state tax dollars may have been funneled to the terrorist group al-Shabaab. He placed some of the blame on Governor Tim Walz.
Bessent noted that the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) suspects money service providers are involved in the fraud scheme, but he didn’t identify any specific financial institutions associated with it.
“We’re looking deeply into the fraud, particularly funds that might have been sent to Somalia via money services businesses that operate outside traditional banks,” Bessent stated at a virtual press conference on Friday. “These funds could have ended up with al-Shabaab. We’re tracking their movement and investigating.”
He emphasized that these financial companies must follow anti-money laundering laws and will be held accountable for their actions.
In December 2025, Bessent had already announced that his agency was examining whether Minnesota funds had potentially been misused to support the Somalia-based al-Shabaab. Over 75 individuals have faced fraud charges in Minnesota, with most being Somali residents. Bessent previously mentioned that a large chunk of the illicit funds had been sent overseas.
Additionally, he mentioned that the Internal Revenue Service (IRS) is auditing financial institutions suspected of facilitating money laundering in the state. Plans are underway for the IRS to form a task force aimed at investigating fraud and misuse, particularly focusing on pandemic-related tax incentives and potential abuse of 501(c)(3) tax-exempt status linked to social services fraud in Minnesota.
Bessent criticized Governor Walz for insufficient oversight of state resources, stating that the Treasury has not fully uncovered the extent of the alleged fraudulent activities. “It’s evident that Governor Walz has not fulfilled his fiduciary responsibilities as the state’s chief executive,” he remarked. “Events like this shouldn’t happen under his leadership.”
Bessent raised questions around the potential depth and organization of the fraud, suggesting, “We don’t yet understand the full reach of what Governor Walz might have allowed. Is this a foreign scheme? Or is it more about local fraudsters taking advantage right in front of him?”
Walz’s office hasn’t responded to requests for comments. Recently, he announced he wouldn’t seek re-election and has faced criticism from Republicans and Donald Trump, who labeled Minnesota a hub for illicit money laundering.
Alongside the Treasury Department’s efforts, Congress is investigating a $250 million fraud case involving the initiative Feeding Our Future, which allegedly mismanaged funds designated for child nutrition programs overseen by Minnesota during the COVID-19 pandemic.
In total, at least 77 individuals have been charged in connection with this scheme, manipulating U.S. Department of Agriculture guidelines that relaxed certain federal Child Nutrition Program requirements.
Another alleged fraud initiative in the state involves the Housing Stability Services program, which reportedly misapplied Medicaid benefits intended to assist individuals with disabilities, mental health issues, and substance use disorders in securing housing.
So far, the Justice Department has indicted fewer than a dozen individuals for Medicaid fraud, although more charges are anticipated. Most of those implicated are reportedly Somali nationals residing in Minnesota. Additionally, Trump announced plans to end Temporary Protected Status for Somali immigrants, which offers them refuge from deportation.
