FinCEN Geographic Targeting Order Reveals the Need for Robust BSA/AML Compliance Protocols
By: Travis Nelson, Shareholder, Financial Institutions Regulatory, Litigation, and Enforcement at Polsinelli
On February 12, 2026, a Financial Crimes Enforcement Network (“FinCEN”) order took effect targeting financial transactions involving suspected Minnesota fraud schemes. On January 9, 2026, FinCEN issued its Geographic Targeting Order Imposing Recordkeeping and Reporting Requirements on Certain Financial Institutions in Minnesota (the “FinCEN Order”), requiring financial institutions to identify and report certain transactions that FinCEN believes are associated with fraud on federal child nutrition programs, particularly past and ongoing suspicious activity potentially related to fraud in Minnesota.
The alleged fraud involved organizations that are accused of setting up Sponsors that were supposed to be facilitating the enrollment and monitoring of locations (“Sites”) that provide free meals to Minnesota children in need. As part of the schemes, fraud rings served as Sponsors within the Federal child nutrition programs and recruited co-conspirators to fraudulently enroll recently established shell companies as Sites with the Minnesota Department of Education (“MDE”). Fraudulently enrolled shell companies often purported to be restaurants, food suppliers, and non-profit organizations involved in social service programs for nutrition and education. The Sponsors then submitted fraudulent documentation on behalf of the complicit Sites that falsely claimed the Sites were feeding thousands of children in Minnesota, which was beyond the capacity for these entities. Upon receiving fraudulent claims from the Sponsors, the MDE issued reimbursements to the Sponsors. After retaining their administrative fees as Sponsors in the Federal child nutrition programs, the Sponsors disbursed the fraudulent reimbursements to their co-conspirators running the Sites. Ultimately, FinCEN alleges, the fraudsters used the proceeds from the scheme to enrich themselves and their co-conspirators, both in the U.S. and abroad.
The FinCEN Order requires all banks and money transmitters located in Hennepin County and Ramsey County, Minnesota, to file reports with FinCEN of certain international funds transfers. The reporting period runs from February 12, 2026, through August 10, 2026. The FinCEN order captures transactions that meet the following criteria: (1) the transaction is in the amount of $3,000 or more; (2) a corresponding payment order or transmittal order is accepted by a bank or money transmitter; (3) the originator/transmittor provides an address in the covered geographic area (Hennepin or Ramsey Counties); (4) the originator/transmittor is not a publicly traded company regulated by the SEC; (5) the originator/transmittor is not a financial institution subject to the BSA; and (6) either the beneficiary/recipient is located outside of the U.S., or the financial institution used by the beneficiary/recipient to receive the funds is located outside of the U.S.
Where the transaction meets the above criteria, the covered bank or money transmitter is required to provide to FinCEN certain information that the entity is already required to retain under 31 C.F.R. § 1020.410(a)(1) and (2). This information includes certain identifying information about the sender and the recipient of the funds. FinCEN notes that the FinCEN Order does not require the gathering of additional information, but rather that such information is provided to the government: “Covered Businesses are already required to retain much of the information required to be reported under the GTO, due to obligations under 31 C.F.R. § 1010.410(e) and 31 C.F.R. § 1020.410(a). The [FinCEN Order] does not alter these obligations. However, instead of simply retaining the information, the [bank or money transmitter] must report it to FinCEN.”
With just over a month between when the FinCEN Order was issued and when the compliance requirement takes effect, the main compliance hurdle was likely to ensure that banks and money transmitters have adequate policies, procedures, and protocols in place to facilitate the uploading of the existing information to FinCEN.
The FinCEN Order is another example if a decades-long history of the U.S. financial system being used to monitor and detect potential criminal activity. In an area where the most lucrative crimes are perpetrated on an interstate and transnational basis, criminals rely heavily on the U.S. financial system to perpetrate and conceal their crimes, and to channel the proceeds of such crimes. As front-line actors in defense of such criminality, banks are uniquely positioned to use their role and resources to ensure that they are not being used as a vehicle for fraudsters. In substantiating this role, banks must develop and maintain a robust BSA/AML compliance program, that includes policies, procedures, and protocols, as well as training, and ongoing audit. At the heart of any robust compliance program are the three pillars of: a comprehensive library of compliance requirements; regular updating of the library to ensure that the institution is seeing the last legal and compliance requirements; and control mapping so that the compliance library requirements are mapped to internal controls, either on a product line or statutory requirement basis, are implemented. When lapses occur, which can happen even in the most well-developed and precisely executed compliance programs, engaging qualified counsel with experience as former regulators and prosecutors is essential.