Fraud Management & Cybercrime
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Fraud Risk Management
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Government
New Agency Focuses on Public Programs, Ignores Private Sector Fraud
President Donald Trump’s recent announcement about the creation of a National Fraud Enforcement division in the Department of Justice sounds like a big deal. The administration, in its fact sheets, says the new agency will fight “the rampant and pervasive problem of fraud” plaguing “federal government programs, federally funded benefits, businesses, nonprofits and private citizens nationwide.”
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A newly created assistant attorney general will be tasked with setting national enforcement priorities and proposing legislative or regulatory fixes to close systemic vulnerabilities. But how much substance is really in this proposal? Will it help the millions of U.S. consumers and businesses victimized by fraud?
Trump’s announcement has little to say about those victims. The main victim appears to be the U.S. government. The new fraud division comes on the heels of DOJ investigations that led to charges against 98 defendants in Minnesota fraud-related cases, most of whom are of Somali descent. The administration cited that crackdown along with other DOJ efforts to curb government fraud – mostly aimed at the state led be Gov. Tim Walz, who ran against Trump as the Democratic vice presidential candidate in 2024.
Trump cited DOJ investigations in the state including a $250 million fraud case related to Minnesota’s Feeding Our Future children’s nutrition program, as well as suspected fraud in housing programs, childcare benefits, Medicaid, mental health and Small Business Administration loans. The investigations are happening in concert with the Trump administration’s order to send 2,000 Department of Homeland Security agents to Minnesota to conduct “targeted, door-to-door investigations at locations suspected of fraud.” So far, more than 1,000 people have been arrested on immigration-related charges.
It sounds good on paper, but what about the rampant fraud in the private sector? How does the administration plan to tackle authorized payment fraud, synthetic identity fraud, pig butchering and money mules?
The fraud losses are daunting in both public and private sectors. For public programs, the most comprehensive government-wide metric available is improper payments, which includes fraud, errors, overpayments and underpayments. Federal agencies reported about $162 billion in improper payments in FY2024.
In comparison, the FBI’s Internet Crime Complaint Center reported that consumers and businesses reported losing $16.6 billion to fraud in 2024 – a 33% increase from 2023. The Federal Trade Commission reported consumer losses of $12.5 billion in 2024. But analysis of FTC data found that these figures vastly understate the true scale of consumer fraud, with broader adjustments for underreporting suggesting total losses could be close to $196 billion – even more than government overpayments.
Missing ‘Half of the Problem’
The announcement belies the administration’s limited thinking. The division’s new mandate focuses on government programs, as if fraud operates in a closed loop. It doesn’t meaningfully engage with the private sector, nor does it grapple with the financial infrastructure that ultimately enables fraud at scale. Even in notorious cases like the Minnesota fraud rings, stolen funds don’t stay confined to nonprofit accounts. They move through banks, payment processors, shell companies and professional facilitators in the private sector.
The emphasis on Minnesota underscores the administration’s urgency, but ignores the broader threat to U.S. consumers. Ironically, one of the first actions of the new administration was to dismantle the Consumer Financial Protection Bureau by halting operations, freezing enforcement, slashing staff and shutting down offices. Consumer protections has been in limbo for the past year, and it doesn’t appear to be a priority for the new National Fraud Enforcement division.
“You can’t focus on only one half of the problem. It’s also nearly impossible to compare public sector and private sector fraud losses,” said Steve Lenderman, head of fraud prevention at isolved. “Both are severely underreported, and without a universal system of record, we will never know the true numbers.”
The government’s response parallels its handling of Paycheck Protection Program loan fraud during the pandemic. Money moved quickly, controls lagged and enforcement ramped up only after the damage was done. As with PPP, the administration is in reactive mode, addressing visible failures rather than confronting the entire fraud ecosystem.
“We need far more emphasis on business and consumer verification, because while individuals are behind these schemes, they are fundamentally using businesses as the vehicle to perpetrate the fraud,” Lenderman said. The government needs to understand it’s an organized activity by coordinated groups, accelerated by AI-driven tools and amplified through social media-based sharing networks.
Yes, the U.S. government has taken a step forward. But the government can learn a lot from the private sector. The best way forward is adopting a national fraud strategy. The U.S. government could follow the lead of other countries such as the United Kingdom and Australia in adopting a true national-level approach to fraud that links public and private-sector data, strengthens business and identity verification, and disrupts financial pathways.
Enforcement alone can’t scale to the size of the threat. Without prevention, coordination and shared accountability across government and private industry, fraud will continue to move faster than the systems created to stop it.