U.S. justice department shifts fraud enforcement to government programme abuse

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DOJ shifts to programme fraud

Highlights

Department of Justice launches National Fraud Enforcement Division with 500 staff by August 24, aiming to double its size within two years and focus on government programme abuse.
Administration reports uncovering $230bn in federal benefit programme fraud and stopping over $56bn in attempted fraudulent spending so far this year.
White-collar prosecutions dropped 20 percent year-on-year in May to 285 cases, despite increased focus on anti-fraud efforts and concerns over uneven enforcement.

New division expands anti-fraud mandate

As first reported by the Financial Times, the Department of Justice is creating a National Fraud Enforcement Division that will reach 500 attorneys and staff by August 24, drawing initial resources from other parts of the department and aiming to nearly double in size over the next two years.

The unit is set to focus on fraud involving public trust and financial integrity, healthcare, internal revenue, global trade and commerce, and corporate misconduct. Colin McDonald, a longtime department official, is set to lead the division and says it is designed to coordinate enforcement across government, rather than leave agencies working in isolation.

McDonald says the government is moving away from a longstanding "pay and chase" model, where funds are paid out before investigators pursue suspected fraudsters. He says agencies are trying to stop improper payments earlier, while the department is building enough prosecutorial capacity to pursue cases that still get through.

The department is also using AI more aggressively to identify crime patterns and methods used to avoid detection. Stephen Weiss, associate deputy attorney-general, says the technology is expected to streamline investigations and make enforcement more agile and efficient.

Policy trade-offs draw scrutiny

The White House says fraud enforcement is a top administration priority, with vice-president JD Vance playing a central role through the anti-fraud task force. The administration says it has uncovered $230bn in fraud across federal benefit programmes since Trump’s second term began and halted more than $56bn in attempted fraudulent spending this year.

That push comes against a broader backdrop of reduced white-collar enforcement elsewhere. The department has softened its stance on foreign bribery and other corporate crime areas, while government data analysed by the Transactional Records Access Clearinghouse shows 285 new white-collar prosecutions in May, down nearly 20 per cent from a year earlier and more than 16 per cent below 2021 levels.

Critics argue the anti-fraud agenda is being applied unevenly, including in taxpayer-funded programmes in Democratic-led states such as California and Minnesota. Paul Pelletier, a former senior fraud prosecutor, says the changes weaken the criminal division’s independence and warns that an overly broad mandate could make the new division harder to manage effectively.

Questions have also grown because Trump has pardoned individuals convicted of fraud, including political allies. Still, administration officials say closer co-ordination between the new division and the White House task force will help remove bureaucratic delays and strengthen prosecution of cases involving losses to public entities.

Our earlier article on a Medicare fraud money-laundering case described how prosecutors targeted a former Brooklyn bank manager who helped move more than $8 million in illicit health care proceeds through the U.S. banking system. The report also highlighted the Justice Department’s broader ramp-up in health care fraud enforcement, including the announcement of the National Fraud Enforcement Division and increased coordination across agencies.

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