By David Lawder LE SUEUR, Minnesota, Jan 9 (Reuters) – The U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) has notified four money transfer firms they are under investigation for alleged fraud as part of a crackdown on federal social benefits abuses in Minnesota, Treasury Secretary Scott Bessent said on Friday. Bessent also told a virtual news conference that some banks in the state involved in money transfer transactions were being audited by the Internal Revenue Service Civil Enforcement Division for alleged money laundering activities. He declined to identify the banks and money services firms being scrutinized, but said the U.S. government was determined to get to the bottom of alleged social services fraud schemes in Minnesota that he said had diverted billions of dollars intended for social welfare programs. Bessent said some funds may have "potentially been diverted" to the al Shabaab terrorist group in Somalia, but declined to provide specific evidence. "If you're sending money back to Somalia, then you're getting too much," Bessent told Reuters in an interview during a three-day visit to the Minneapolis-St. Paul area. "Or you're part of the scam, and we're going to track you down." He also said the investigation of the money transfers should not harm people who can prove the funds did not come from social service payments. Asked if the audits would have a chilling effect on legitimate remittances made by migrants to families overseas, Bessent said: "No, it shouldn't. Anyone who can prove where the money has come from … is fine." Bessent said FinCEN has issued a geographic order increasing scrutiny on banks and money transmitters in Hennepin and Ramsey counties in Minnesota, covering both Minneapolis and St. Paul. This will require firms to report additional information on funds transferred outside the U.S., including FinCEN reports on transactions above $3,000. IRS TO FORM TASK FORCE The IRS will also form a task force to investigate nonprofit groups regarding their handling of pandemic-era tax incentive programs, the Treasury chief said. The Trump administration has singled out Minnesota Governor Tim Walz and the state, including its large population of Somali Americans and Somali immigrants, over allegations of fraud dating to 2020 by some nonprofit groups backed by federal funding that administer the state's childcare and other social services programs. "It's clear that Governor Walz has been negligent in his fiduciary duties as the 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." Walz, who this week has said he will not seek a third term, has referred to the fraud scandal as a crisis and criticized Trump and other Republicans for what he called bad-faith attacks on him. (Reporting by David Lawder in Le Sueur, Minnesota, Andrea Shalal and Susan Heavey in Washington; Editing by Rod Nickel and Tom Hogue)
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