Bessent Says Minn. Tax Dollars May Have Been Diverted to Terror Group

Treasury Secretary Scott Bessent warned Friday that Minnesota taxpayer dollars may have been diverted to the Somali-based terrorist organization al-Shabab, placing blame squarely on Democratic Gov. Tim Walz for what he described as a stunning failure of oversight as multiple fraud investigations continue to engulf the state.

Bessent said the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is actively investigating whether money service businesses were used to funnel public funds overseas, according to Fox News. While he did not identify the financial institutions under scrutiny, Bessent made clear the inquiry is serious and ongoing.

“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.

“These funds could have potentially been diverted to the terrorist organization al-Shabab,” he said. “We have traced where the money went and are examining that.”

Bessent emphasized that any financial institutions involved will be held accountable under federal law.

“These businesses had an obligation to comply with anti-money laundering laws, and they will be held responsible for any crimes they committed,” he said.

The Treasury secretary noted that in December 2025, he announced the department was leading an investigation into whether Minnesota funds were being siphoned off to al-Shabab. Since then, the scope of the alleged fraud has continued to widen.

According to federal officials, more than 75 individuals have already been charged in connection with fraud schemes tied to Minnesota’s social services system. Bessent has previously stated that a substantial portion of the stolen funds was transferred overseas.

On Friday, Bessent also revealed that the Internal Revenue Service’s civil enforcement division is auditing financial institutions suspected of helping launder Minnesota taxpayer money. He said the IRS plans to announce a new task force focused on fraud involving pandemic-era tax incentives and the abuse of 501(c)(3) tax-exempt status by organizations linked to Minnesota-based social services fraud.

In addition, Treasury officials are providing specialized training to Minnesota law enforcement on how to use financial intelligence—such as suspicious activity reports—to better detect and combat large-scale fraud.

Bessent did not mince words when assigning responsibility for the scandal.

“It’s clear that Governor Walz has been negligent in his fiduciary duties as chief executive of the state of Minnesota that this would happen on his watch,” Bessent said.

“We are actively pursuing all leads to see the level of involvement, whether it’s limited to negligence and incompetence or something more than that,” he added.

“We do not know the depth, breadth, and collusion in this financial calamity that Governor Walz has allowed to happen,” Bessent said. “Was this directed from overseas, or was it allowed to flourish right here in Minnesota. We will find out.”

Walz’s office did not immediately respond to requests for comment.

The governor has previously pushed back on reports suggesting the total fraud could exceed $9 billion, dismissing those figures as exaggerated.

“I am accountable for this, and more importantly, I am the one that will fix it,” Walz told reporters in December.

Walz, who announced this week that he will not seek re-election, has faced intensifying criticism from Republicans and President Donald J. Trump, who has repeatedly labeled Minnesota a hotspot for fraudulent money laundering operations.

Lawmakers are also continuing to investigate the massive “Feeding Our Future” scandal, an alleged $250 million fraud scheme involving a federally funded children’s nutrition program administered by Minnesota during the COVID-19 pandemic. At least 77 people have been charged in that case.

Federal authorities are separately probing suspected fraud within Minnesota’s Housing Stability Services Program, which provides Medicaid-funded housing assistance to vulnerable populations. While fewer than a dozen individuals have been charged so far, officials have indicated more indictments are likely.

Taken together, the investigations paint a damning picture of systemic failure in Minnesota’s governance—one now drawing the full attention of the Trump administration as it moves to clamp down on fraud, foreign funding, and threats to national security.