Federal Officials Probe Whether Minnesota Fraud Funds Reached Terror Group

Investigation Intensifies Into Oversight Failures and Alleged Money Transfers Linked to Al-Shabaab

Federal authorities are investigating whether fraudulent payments tied to large-scale welfare and social services fraud in Minnesota were routed, at least indirectly, to al-Shabaab, a U.S.-designated terrorist organization based in Somalia, a probe that has sharpened scrutiny on state oversight and Gov. Tim Walz’s administration. 

Treasury Secretary Scott Bessent confirmed that the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and other agencies are examining suspicious transfers that may involve Minnesota benefit funds set overseas through informal money service businesses. 

Federal and congressional scrutiny has intensified as investigators work to trace the flow of money from alleged Minnesota fraud schemes into international channels. 

House Oversight Committee Chairman James Comer has expanded a formal investigation into the widespread fraud uncovered in the state’s social services programs and criticized state officials for failures of oversight that, in the committee’s words, “allowed taxpayer funds to be funneled to terrorist networks.” 

The backdrop to these probes began with a series of pandemic-era fraud cases investigated by federal prosecutors, notably involving the Feeding Out Future nonprofit and other programs, which allegedly misused hundreds of millions in taxpayer funds.

Prosecutors and federal documents show that dozens of individuals have been charged in multiple schemes totaling into the hundreds of millions, with some fraudulently obtained funds wired internationally. 

While some federal officials and Republican lawmakers have raised concerns that portions of this fraud may have ultimately reached groups such as al-Shabaab–often through informal hawala networks—law enforcement sources caution that direct links to terrorism financing have not been publicly confirmed.

The investigations come amid broader federal actions to freeze certain benefit payments to Minnesota and increase auditing and enforcement, with agencies including the Treasury, IRS, and Department of Agriculture taking steps to combat fraud and improve financial tracking.