Recent FinCEN Actions Signal Trump Administration's Focus on Escalating AML Enforcement

The U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) recently announced a sweeping enforcement operation targeting money services businesses (MSBs) operating along the Southwest U.S. border. FinCEN's actions highlight certain enforcement risks for financial institutions subject to the Bank Secrecy Act (BSA), with continuing anti-money laundering (AML) compliance scrutiny expected in 2026. The risk is particularly high for MSBs along the Southwest border and in areas where the government is investigating large-scale government benefits fraud.

FinCEN Leverages Advanced Technology to Target MSBs Along Southwest Border

In late December 2025, FinCEN announced a "first-of-its-kind, data-driven enforcement operation" targeting more than 100 MSBs operating along the Southwest U.S. border. The operation resulted in six notices of investigation, dozens of examination referrals to the IRS and more than 50 compliance outreach letters to potentially noncompliant entities. FinCEN indicated that the operation is "ongoing" and may result in civil money penalties, civil injunctive actions, warning letters and criminal referrals. FinCEN further noted that it is closely coordinating with federal and state agency partners, including the IRS.

In a press release and similar video statement, Treasury Secretary Scott Bessent said, "At President Trump's direction, the Treasury Department is utilizing all tools to stop terrorist cartels, drug traffickers and human smugglers. This sweeping operation will root out potential cartel-related money laundering from the U.S. financial system."

The operation is the latest example of FinCEN targeting money laundering along the Southwest border that may involve international cartels or transnational criminal organizations (TCOs), consistent with a day-one executive order (EO) issued by President Donald Trump, a March 2025 Geographic Targeting Order (GTO) for MSBs along the Southwest border and a November 2025 FinCEN alert.

FinCEN emphasized that its "data-driven operation" was based on its analysis of more than 1 million Currency Transaction Reports (CTRs) and approximately 87,000 Suspicious Activity Reports (SARs). FinCEN is now "applying high-performance data processing to uncover illicit networks and protect the U.S. financial system from evolving threats" and "transform[ing] fragmented financial information into reliable, decision-grade leads at scale."

FinCEN's continued modernization and use of advanced technology to sift through financial data will likely increase enforcement risk for financial institutions subject to the BSA. That is particularly true for MSBs along the Southwest border, which FinCEN noted can face elevated exposure to illicit activity, "including the laundering of proceeds from drug trafficking, smuggling of illegal aliens and other serious crimes."

Although FinCEN's announcement does not specify, some of the "data" driving the operation may have come from the March 2025 GTO, which has been the subject of litigation and was modified in September 2025 in order to raise the monetary reporting threshold to $1,000 and apply to new areas.

As Holland & Knight's Financial Services Regulatory Team wrote in a recent article in the ABA Banking Journal, the elevated risk profile for such MSBs has been a consistent trend across 2025 and one that is expected to continue well into 2026.

FinCEN Announces Initiatives Targeting Alleged Government Benefits Fraud in Minnesota

Just over two weeks after announcing the Southwest border operation, on January 9, 2026, the Treasury Department announced several FinCEN initiatives to combat what it called "rampant government benefits fraud in Minnesota."

As with the announcement regarding the MSBs along the Southwest border, FinCEN again announced that it has issued notices of investigation to MSBs, this time in Minnesota. FinCEN also announced a new GTO and related FAQs requiring banks and MSBs located in Hennepin and Ramsey counties, which include Minneapolis and St. Paul, to file reports with FinCEN about certain transactions of $3,000 or more.

Additionally, FinCEN issued an alert "on fraud rings and their exploitation of federal child nutrition programs in Minnesota." Citing to criminal fraud prosecutions brought by the U.S. Department of Justice (DOJ) in 2023 and 2025, the alert highlighted a number of methods used to launder funds, including:

• wire transfers through banks to U.S. and foreign-located individuals and recently established shell companies under their control
• wire transfers through banks to virtual asset service providers for the purchase of digital assets
• international wire transfers, allegedly for personal remittances, via MSBs
• purchases and redemptions of cashier's checks.

The alert urged financial institutions to conduct an appropriate review of customers' business activities to detect fraud, with FinCEN listing 13 red flags indicative of potentially fraudulent activity that should be considered as part of such reviews. The red flags include, among others, companies or nonprofit organizations that are enrolled in a government benefit program and 1) receive a significant amount of government reimbursements in a short period of time or soon after establishing operations, 2) are unable to verify their operations when questioned, 3) make significant cash withdrawals or 4) frequently purchase cashier's checks or send significant amount of wire transfers to individuals or companies in foreign jurisdictions.

Though the alert targets fraud only in Minnesota, it cites to a March 2025 executive order intended to more broadly combat fraud and improper federal government payments. Moreover, the FinCEN alert came just one day after the Trump Administration announced the creation of a new DOJ division for national fraud enforcement, which plans to focus on fraud in Minnesota, as well as broader enforcement of "federal criminal and civil laws against fraud targeting federal government programs, federally funded benefits, businesses, nonprofits, and private citizens nationwide."  Referencing the FinCEN activity in Minnesota and new DOJ division, Secretary Bessent has stated that President Trump "wants to scale the model we have established in Minnesota to root out waste, fraud and abuse in every corner of the country."

As such, though FinCEN is currently targeting alleged fraud in Minnesota, industry should be prepared for FinCEN's focus to expand to other geographic areas where federal authorities are investigating wide-scale government benefits fraud.

Compliance Considerations

Financial institutions looking to mitigate enforcement risk would do well to apply compliance measures that incorporate the recent FinCEN guidance and red flags discussed above. They should also incorporate certain "compliance considerations" that FinCEN emphasized in a December 2025 press release announcing a $3.5 million civil penalty against a virtual asset platform (Paxful), which was part of a parallel resolution with DOJ.

In one sense, an enforcement action targeting a virtual asset platform has limited commonality with the operations targeting MSBs in Minnesota and the Southwest border, which focus on transactions, often involving paper currency, flowing through specific geographic areas of the U.S. Nonetheless, the Paxful case is instructive because the FinCEN press release included a set of "compliance considerations" for industry, similar to the approach typically taken by the Treasury Department's Office of Foreign Assets Control (OFAC) in its enforcement press releases.

Those considerations, many of which can apply to all MSBs, include:

• MSB Registration Requirements. Businesses engaged in money transmission services should ensure that they register and maintain registration with FinCEN as MSBs.
• Risk-Based AML Programs. AML programs should be risk-based and "commensurate with the risks posed by the location and size of, and the nature and volume of the financial products and services provided by, the institution." Financial institutions dealing in virtual assets or prepaid access "should consider the coverage of these products within their procedures to monitor for potentially suspicious activity, including the extent to which these procedures support the volume of relevant activity."
• Customer Verification and Geolocation Monitoring. Financial institutions should ensure they maintain appropriate processes to verify customer identities, including the potential use of IP address and geolocation data to mitigate exposure to high-risk jurisdictions and prohibited parties. Financial institutions may also consider the nature of their customers' businesses to mitigate the risk that customers may be engaged in illicit activities.
• Timely Remediation. Financial institutions are encouraged to promptly mitigate compliance deficiencies and remediate reporting issues when they are identified and ensure an appropriate "tone at the top."

Looking Ahead: AML Enforcement in 2026

FinCEN's recent actions collectively signal that BSA/AML enforcement is likely to continue, if not escalate, in 2026. This appears particularly likely given FinCEN's emphasis on its enhanced data processing capabilities, which will allow FinCEN to more efficiently target egregious cases consistent with the Trump Administration's policy priorities.

With the first year of the Trump Administration in the rearview mirror, those priorities have become clear. FinCEN is using all of its tools to combat money laundering involving cartels and TCOs. It is also now targeting financial institutions that do not sufficiently detect, deter and report customers involved in government benefits fraud. Financial institutions or other businesses with potential exposure in these areas should consider enhanced compliance steps to mitigate enforcement risk.

During its first year, the Trump Administration prioritized regulatory recalibration to reduce burden on the banking industry. This effort included October 2025 FAQs published by FinCEN and other federal banking regulators that clarified expectations with respect to the filing of SARs. But financial institutions should not construe such efforts to clarify regulatory expectations as a relaxation of core compliance requirements, especially with respect to funds potentially involving cartels, TCOs or fraud on the federal government.

Holland & Knight is closely monitoring potential regulatory changes to the BSA pending in the U.S. Congress, such as the STREAMLINE Act, which could raise reporting thresholds and otherwise modify the rules in this area. Major changes could indeed be coming, with Treasury Under Secretary for Terrorism and Financial Intelligence John Hurley stating in late 2025 that the Trump Administration has a “once-in-a-generation opportunity” to reform the AML system.  But unless and until the rules change, financial institutions should ensure they are implementing robust compliance programs consistent with the requirements currently in effect. With FinCEN and DOJ issuing a steady drumbeat of enforcement announcements and indicating an appetite to pursue willful violations, fostering an institution-wide culture of compliance is critical.

For more information about AML compliance or the matters discussed in this alert, please contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.