Treasury Secretary Launches Investigation into Alleged Flow of Minnesota Tax Funds to Al-Shabaab Terrorists

U.S. Treasury Secretary Scott Bessent has launched a federal investigation into allegations that Minnesota tax dollars were diverted to the terrorist organization Al-Shabaab during the Biden administration and under Governor Tim Walz’s leadership.

“At my direction, the Treasury is investigating allegations that under the feckless mismanagement of the Biden Administration and Governor Tim Walz, hardworking Minnesotans’ tax dollars may have been diverted to the terrorist organization Al-Shabaab,” Bessent announced on social media platform X. He promised to share findings as the investigation progresses.

Governor Walz’s office responded that the governor had previously stated he would welcome an investigation should evidence emerge connecting Minnesota funds to the terrorist group.

The probe follows an explosive investigation conducted last month by Ryan Thorpe and Christopher F. Rufo of the Manhattan Institute. Their report uncovered an extensive network of fraud involving Minnesota’s Medicaid Housing Stabilization Services program, Feeding Our Future, and other organizations.

According to the investigators, members of Minnesota’s Somali community were often perpetrators in these schemes. Federal counterterrorism sources confirmed to Thorpe and Rufo that millions of dollars in stolen public funds were transferred to Somalia, ultimately reaching Al-Shabaab, an al-Qaeda-affiliated terrorist organization that has waged a violent insurgency in Somalia for over a decade.

The investigation revealed a complex money trail. The researchers discovered that fraud rings in Minnesota sent money transfers to Somalia through networks of informal money traders known as “hawalas.” These transactions contributed to the estimated $1.7 billion sent by the Somali diaspora to Somalia in 2023—an amount exceeding the Somali government’s annual budget.

Glenn Kerns, a retired Seattle Police Department detective who spent 14 years on a federal Joint Terrorism Task Force, provided insight into the sophistication of these operations. “We had sources going into the hawalas to send money. I went down to [Minnesota] and pulled all of their records and, well s—, all these Somalis sending out money are on DHS benefits,” Kerns told the investigators.

The scale of the alleged diversion is significant enough that one confidential source claimed to Thorpe and Rufo that “The largest funder of Al-Shabaab is the Minnesota taxpayer.” This startling assertion underscores the potential national security implications of what began as welfare fraud investigations.

The case highlights ongoing challenges in monitoring international money flows from diaspora communities. Approximately 40% of Somali households receive remittances from abroad, creating a legitimate financial lifeline that can be difficult to distinguish from illicit transfers.

A former official who worked on the Minneapolis Joint Terrorism Task Force provided context on the regional impact, stating: “Every scrap of economic activity, in the Twin Cities, in America, throughout Western Europe, anywhere Somalis are concentrated, every cent that is sent back to Somalia benefits Al-Shabaab in some way.”

This investigation comes amid growing scrutiny of public benefit programs and their vulnerability to fraud. The Minnesota case represents one of the most serious allegations of domestic welfare fraud potentially funding international terrorism in recent years.

The Treasury Department has not provided a timeline for when their investigation might conclude. Financial intelligence experts note that tracing money through informal hawala systems presents significant challenges for investigators, as these networks often operate outside traditional banking channels that maintain detailed transaction records.

If confirmed, the findings could have profound implications for oversight of social welfare programs and international money transfers, particularly in communities with ties to regions experiencing conflict or terrorist activity.

The investigation also occurs against the backdrop of political transition in Washington, adding another layer of complexity to how federal agencies will approach both the investigation and any resulting policy recommendations.