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Treasury Secretary Scott Bessent said it’s possible that Minnesota tax dollars could have been filtered to terrorist group al-Shabab, and cast blame on Minnesota Gov. Tim Walz as Minnesota faces investigations into multiple alleged fraud schemes plaguing the state’s social services system.
Bessent said that the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) that money service businesses believed to have been connected to the fraud scheme, although he did not name which financial institutions are suspected to be involved.
“We are thoroughly investigating the fraud, including funds sent to Somalia through money service businesses, which provide financial services outside of a formal bank,” Bessent said during a virtual press conference Friday. “These funds could have potentially been diverted to the terrorist organization al-Shabab. We have traced where the money went and are examining that.”
Scott Bessent, U.S. Treasury Secretary, during an Economic Club of Minnesota event in Golden Valley, Minnesota, US, on Thursday, Jan. 8, 2026. (Ben Brewer/Bloomberg/Getty Images)
“These businesses had an obligation to comply with anti-money money laundering laws, and they will be held responsible for any crimes they committed,” Bessent said.
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In December 2025, Bessent announced that his agency was spearheading an investigation evaluating whether Minnesota’s funds were potentially diverted to al-Shabab, which is based in Somalia. So far, more than 75 people have been charged in connection with alleged fraud in the state — most of whom are part of Minnesota’s Somali population.
Bessent previously has said that a significant portion of the funds obtained through the alleged fraud schemes were transferred overseas.
Likewise, Bessent said Friday that the Internal Revenue Service (IRS) Civil Enforcement is auditing financial institutions that allegedly supported the laundering of Minnesota funds, and that the IRS is planning to unveil the “formation of a task force to investigate any fraud and abuse involving pandemic-era tax incentives and misuse of 501(c)(3) tax-exempt status by entities implicated in the Minnesota based social services fraud schemes.”
Fallout from Minnesota daycare fraud has prompted DHS to investigate whether it can and should denaturalize US citizens of Somali descent involved in the scheme. (Kevin Carter/Getty Images)
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Additionally, Bessent said that the Treasury is issuing training to Minnesota law enforcement on “how to utilize financial data such as suspicious activity reports to better combat these fraud schemes.”
Bessent also blamed Walz for his lack of oversight of the state’s funds, and said that the Treasury has yet to determine the full extent of the alleged fraud schemes.
“It’s clear that Governor Walz has been negligent in his fiduciary duties as a 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.”
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“We do not know the depth, breadth, and collusion in this financial calamity that Governor Waltz has allowed to have happen,” Bessent said. “Was this directed from overseas? Is it the endogenous flourishing of these fraudsters that Governor Waltz allowed to grow right here in the backyard and take advantage of hard working people of Minnesota? We’ll see. So we are going to track this everywhere, from top to bottom.”
Walz’s office did not immediately respond to a request for comment from Fox News Digital.
However, Walz previously has said that he believes that reports suggesting the fraud could total over $9 billion are exaggerated and “sensationalized,” he’s also promised to address the issue.
“I am accountable for this, and more importantly, I am the one that will fix it,” Walz told reporters in December 2025.
Walz, who announced Monday he wouldn’t run for re-election, has recently come under fire from Republicans and President Donald Trump, who has labeled Minnesota a “hub of fraudulent money laundering activity.”
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In addition to the Treasury Department, lawmakers have launched probes into Minnesota’s alleged “Feeding Our Future” $250 million fraud scheme that allegedly targeted a children’s nutrition program the Department of Agriculture funded and that Minnesota oversaw during the COVID-19 pandemic.
Minnesota Governor Tim Walz speaks during a press conference on new gun legislation at Bloomington City Hall in Bloomington, Minnesota, on Aug. 1, 2024. (Stephen Maturen/Getty Images)
At least 77 people have been charged in that scheme, which took advantage of the U.S. Department of Agriculture’s decision to waive certain Federal Child Nutrition Program requirements.
Likewise, another alleged fraud scheme in the state stems from the Housing Stability Services Program, which allegedly offered Medicaid coverage for housing stabilization services in an attempt to help those with disabilities, mental illnesses and substance-use disorders receive housing.
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The Justice Department so far has charged less than a dozen people for allegedly defrauding the program that runs through Minnesota’s Medicaid service, but more charges are expected.
The bulk of those charged are part of Minnesota’s Somali population, prompting Trump to announce in November that he was ending the Temporary Protected Status for Somali migrants in Minnesota that offers protections against deportation.
