The Department of Justice's new National Fraud Enforcement Division is heightening federal scrutiny at the intersection of financial fraud and immigration enforcement. At the same time, multiple federal agencies are demonstrating a willingness to freeze funding while investigations are active. These developments increase the risk for businesses that a single compliance failure could trigger swift, multi-agency consequences.
Background
On January 8, 2026, the Trump administration announced the establishment of the National Fraud Enforcement Division. The primary purpose of this new division is to monitor, investigate, and prosecute allegations of fraud within federally funded programs. Vice President JD Vance said the Fraud Enforcement Division will “be run out of the White House under the supervision of me and the president of the United States.” Such a practice is a departure from traditional reporting within the Department of Justice, but it is consistent with pronouncements made by Attorney General Pam Bondi in February 2025 that the responsibility of Justice Department lawyers is to advocate “zealously” for “their client’s interests” and that their client, essentially, is the president, as DOJ attorneys are “his lawyers.” The purpose of this shift in reporting structure is to facilitate robust multi-agency collaboration in order to pursue and prevent fraud more effectively. On January 28, 2026, President Trump nominated Colin McDonald, a current associate deputy attorney general, to lead the day-to-day operations and strategy for this new division.
The impetus behind the establishment of this new division derives from recent investigative and enforcement actions taken by the Department of Justice known as “Operation Twin Shield” in the Minneapolis-St. Paul area. “Operation Twin Shield” was a widespread federal immigration and fraud investigation that began in September of 2025 and involves various federal agencies, including U.S. Citizenship and Immigration Services (USCIS) and Immigration and Customs Enforcement (ICE). According to the Trump administration, this operation is focused on investigating fraud allegations within the state, specifically targeting Medicaid, child care, and healthcare-related agencies and programs. These efforts included the deployment of Department of Homeland Security agents to investigate these claims of fraud through document reviews, surveillance, and field interviews. It was reported by Homeland Security that during the operation nearly 1,500 in-person interviews with undocumented immigrants took place as well as over 2,000 site visits to homes and workplaces. More recently, the Department of Homeland Security and USCIS further amplified fraud enforcement efforts by launching “Operation PARRIS” in Minnesota. The launch of “Operation Twin Shield,” followed by “Operation PARRIS,” underscores the Trump administration’s heightened focus on immigration enforcement and its concerted efforts to identify and address allegations of fraud tied to federal funding.
A New Precedent for National Enforcement Policy and Strategy
The social, economic, and operational consequences of these investigations have been substantial and, according to the White House, have set a new precedent for national enforcement policy and strategy. As a result thus far, the Department of Health and Human Services (DHHS), the Small Business Administration (SBA), and the Department of Agriculture (USDA) have attempted to suspend funding of various federal programs in Minnesota, including for child care assistance, economic injury disaster loans, and Supplemental Nutrition Assistance Program (SNAP) funds. Several of those freezes are tied up in the courts.
The scope of scrutiny continues to expand. The Department of Housing and Urban Development (HUD) and the Department of Labor (DOL) have since launched parallel investigations into housing-assistance fraud and unemployment-related fraud, respectively. Federal agencies have also been directed to adopt more rigorous screening procedures for refugee petitions and pending applications. The new National Fraud Enforcement Division is tasked with overseeing these sweeping investigative and enforcement efforts.
Takeaways for Businesses
For businesses and institutions that rely on federal funding, the centralization of fraud enforcement, coupled with the focus on this administration’s immigration priorities, requires active risk management. The most immediate practical takeaway is the need to prepare for increased federal scrutiny from multiple agencies. Businesses and institutions can expect that data or information procured from this increased scrutiny will be shared across federal agencies to a greater extent. Therefore, for example, a discrepancy in a payroll ledger or a grant report could quickly trigger a concurrent investigation into immigration compliance or healthcare billing. Organizations should consider refining their internal controls as needed to ensure that information is maintained appropriately and consistently so that submissions to one federal agency align perfectly with data submitted to another.
Additionally, the precedent set in Minnesota regarding federal payment suspensions highlights a critical risk for any entity dependent on federal funding, whether in full or in part. As seen with the freezing of SNAP benefits in Minnesota, the federal government has demonstrated a willingness to freeze funding streams while investigations are active. Businesses and institutions should proactively evaluate their financial resilience and establish contingency plans to maintain operations in the event of a temporary suspension of federal funds. Because your funding may be halted with little or no notice, you may have little time to prove the government wrong.
Given the Trump administration's explicit focus on the intersection of financial fraud and immigration enforcement, businesses and institutions should strengthen their compliance procedures in both of these respects. This includes rigorous verification of eligibility for all employees, contractors, and sub-grantees to mitigate the risk of becoming collateral damage in an immigration-focused fraud inquiry. Finally, because the assistant attorney general overseeing the newly established National Fraud Enforcement Division will be reporting directly to the White House, and will also be tasked with advising on new regulations, compliance teams must remain alert, anticipating that the regulatory goalposts could shift toward more stringent reporting requirements in the near future.
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