Investigators are reviewing whether money stolen from state social programs moved through hawala networks and reached Somalia.
WASHINGTON — Federal prosecutors and former counterterrorism officials say Minnesota is confronting one of the largest welfare-fraud waves in U.S. history, and some of the stolen money may have ultimately benefited al-Shabaab, the al-Qaida-linked group fighting Somalia’s government. The allegation surfaced publicly Friday, adding a national-security layer to ongoing fraud cases tied to state-funded social services.
The focus now extends beyond loss to taxpayers. Prosecutors in Minnesota have charged dozens of defendants across multiple schemes, while investigators examine whether cash siphoned from programs such as Medicaid’s Housing Stabilization Services and other social-service funds was routed overseas through informal money transfer networks, commonly known as hawalas. Once in Somalia, former investigators say, al-Shabaab routinely extracts a share of remittances moving through areas it influences. The U.S. Attorney’s Office has emphasized that the financial investigations remain active, with related prosecutions continuing to roll out in federal court.
The current wave of cases grew after several high-profile indictments and pleas tied to pandemic-era child-nutrition funding, followed this year by charges alleging false billing for autism therapy and fraud in housing assistance. Acting U.S. Attorney Joseph H. Thompson has described the activity as a “web” of schemes spanning programs and players. In September, federal prosecutors charged a 28-year-old woman in a $14 million autism-services case; authorities said it was the first filing in a broader probe of that program. “Each case we bring exposes another strand of this network,” Thompson said in announcing that charge. Former investigators now say it is “yes, absolutely” plausible that money diverted from Minnesota programs later passed through hawala corridors to Somalia, where militants often tax transactions as a matter of control.
Officials and experts describe the mechanics this way: fraud proceeds, sometimes withdrawn in cash, move through community couriers or licensed money transmitters into hawala systems that settle balances between senders in the United States and brokers overseas. Once funds reach parts of Somalia, militants extract fees or “taxes” to allow commerce and travel. Investigators have not said how much money might have reached al-Shabaab or whether specific defendants intended to finance terrorism; those points remain unknown. Prosecutors, however, say the financial records behind the Minnesota cases show losses in the millions and, collectively across programs, potentially much higher. Minnesota’s U.S. Attorney’s Office has also linked threads between child-nutrition fraud, housing-assistance fraud and autism-services fraud, pointing to overlapping operators and methods.
Minnesota has one of the nation’s largest Somali-American communities, centered in Minneapolis and surrounding suburbs. Community leaders have long condemned both extremist violence overseas and criminal fraud at home, warning against painting immigrants broadly with suspicion. At the same time, some current and former public officials in Minnesota say the sheer size of recent fraud cases diverted resources intended for vulnerable residents. Former state senator David Gaither said the scale “is beyond criminal,” arguing that needy families lost access to services. Reporters who have examined filings and audits say enforcement alone struggles to keep pace with fast-changing schemes, noting that policy changes often lag fraud tactics.
Earlier prosecutions set the stage. The pandemic-era child-nutrition investigation known as “Feeding Our Future” has produced dozens of guilty pleas and convictions, with prosecutors describing losses in the hundreds of millions. This fall’s autism-services case alleged fake diagnoses and billing patterns that steered at least $14 million from Medicaid. Prosecutors have also targeted misuse of Housing Stabilization Services, a Medicaid benefit designed to keep disabled or at-risk people in housing. In announcing the autism-services charge, Thompson said the cases are connected by common actors and money flows. State and federal agencies say they have tightened oversight, but they have not released a full accounting of total loss across all programs.
Investigators have not publicly identified any one transaction that paid al-Shabaab directly from Minnesota fraud. Instead, former federal counterterrorism officials describe a familiar pattern in which militants in Somalia skim a portion of many remittances moving through territories they influence. That practice, they say, means any illicit funds entering those corridors risk contributing to militant coffers, whatever the sender’s purpose. Financial-intelligence teams are now comparing bank activity, cash withdrawals and money-service business records with case files from the fraud prosecutions to map possible overseas paths. Authorities have not announced terrorism-financing charges in the Minnesota fraud cases to date.
The widening attention comes amid renewed national debate over immigration and public benefits policy. Minnesota leaders have stressed that the vast majority of Somali-American residents are law-abiding and that prosecutions should target individuals, not communities. Defense attorneys in some fraud cases have argued their clients provided real services or were misled by others, setting up a courtroom clash over intent and documentation. Prosecutors counter that fabricated invoices, duplicate claims and cash shipments show organized theft of public money. Court filings indicate investigators are still executing search warrants, seizing records and interviewing witnesses tied to billing networks.
Next steps are procedural. Several defendants in the child-nutrition cases are awaiting sentencing, while others face trial dates in federal court. Additional filings are expected in the autism-services probe as agents analyze medical and billing records. State officials have said oversight changes to housing-assistance benefits will continue into next year. Federal authorities have not scheduled a public briefing on the alleged overseas flows but say the financial-tracking work is ongoing. Prosecutors have urged judges to order restitution where possible, though recovery totals are uncertain given the scale of loss and the movement of money offshore.
In Minneapolis, residents near several offices raided in earlier cases said they watched investigators carry out boxes of records and computer equipment. Outside a small market once listed as a child-nutrition meal site, a landlord described months of closed doors after the indictment. At a nearby mosque, a volunteer said congregants worry that headlines about militant groups will stigmatize families who fled war and send money to help relatives survive. “People are scared their support for cousins back home will be viewed as criminal,” the volunteer said. “They want the fraud punished, but they don’t want their community blamed.”
As of Monday evening, prosecutors say the fraud investigations remain active and financially complex, with additional court filings possible in the coming weeks. The U.S. Attorney’s Office has not provided an updated estimate of total losses across programs; the next expected milestones are sentencings in existing child-nutrition cases and further charging decisions in the autism-services probe.
Author note: Last updated November 24, 2025.