The U.S. Department of the Treasury has opened a sweeping federal investigation into allegations that dozens of Minnesota state employees funneled public money to Somalia through fraudulent financial activities. Officials are now examining whether any portion of those transfers may have ended up with al-Shabaab, a U.S.-designated terrorist organization.
Treasury Secretary Scott Bessent confirmed the probe on Monday, saying federal investigators are reviewing potential violations of anti–terror financing laws. The inquiry is being led by the department’s Financial Crimes Enforcement Network (FinCEN), which is working to track the movement of the suspicious payments.
State Audit Exposes Widespread Internal Fraud
The federal review follows a detailed report released by Minnesota’s Legislative Auditor, which uncovered what it described as a “large-scale, coordinated fraud scheme” operating inside multiple state agencies. According to the audit, at least 480 employees from the Departments of Education, Human Services, Corrections, and Health allegedly manipulated state payment systems over several years.
Investigators say approximately $ 300 million was misdirected to individuals in Somalia through tactics such as:
- Fabricated invoices and expense claims
- Fraudulent service contracts
- Altered direct-deposit routing systems
- Manipulated internal accounting records
The scheme reportedly came to light after state finance officials detected unusual international payment activity.
Federal Agencies Assess Possible Terror Financing Risks
While no public evidence has confirmed that the diverted money reached al-Shabaab, the Treasury Department is now examining whether any of the funds were transferred into networks linked to extremist groups. Secretary Bessent emphasized the seriousness of the allegations, noting that U.S. law strictly prohibits providing resources to organizations listed under federal terrorism statutes.
FinCEN analysts are currently tracing financial pathways and working alongside other federal agencies to determine the final destination of the funds.
Employees Suspended as Federal Review Continues
Minnesota Governor Tim Walz has placed all implicated staff members on paid administrative leave pending the ongoing investigation. His office has pledged full cooperation with federal authorities and has launched internal reviews across the affected departments.
The Legislative Auditor has forwarded its findings to the Treasury Department and the FBI. To date, no federal criminal charges have been filed, though officials say the case is still in an early phase.
A Case With National Security Implications
The investigation has drawn nationwide attention due to the significant amount of taxpayer money involved and the national security concerns tied to potential terror financing. Federal officials say the review will continue until investigators determine exactly how the funds were moved and who ultimately received them.
