Banking and Finance Law Daily Wrap Up, CRIMES AND OFFENSES—FinCEN identifies $270 million in potential student aid fraud, (Oct 20, 2026)

By Nora Macaluso

A July alert urging banks to watch for fraud linked to student aid has been followed by the filing of nearly 100 suspicious activity reports, the Treasury said.

The Treasury Department said its Financial Crimes Enforcement Network (FinCEN) has identified about $270 million in suspicious financial activity potentially linked to fraud against federal student aid programs and has referred the findings to federal investigators.

“Federal student aid is intended to expand educational opportunities, not line the pockets of fraudsters who steal from students pursuing their education and hardworking taxpayers,” said Treasury Secretary Scott Bessent.

Bessent said the Treasury is working with financial institutions and law enforcement to identify fraud, recover funds, and “hold those responsible accountable.”

Education Secretary Linda McMahon said a new fraud-detection system screening Free Application for Federal Student Aid (FAFSA) forms “stops fraud at the start of the federal student aid process.”

FinCEN sent an alert in July urging banks to watch for and report suspicious activity involving financial aid payments and refunds, saying fraud rings were using ruses including stolen identities to enroll in educational institutions and unlawfully acquire federal funds from student aid programs (see Banking and Finance Law Daily, Jul. 27, 2026).

Tactics FinCEN identified included obtaining personally identifiable information to create “ghost students,” using artificial intelligence to generate false documents, and recruiting “straw students,” complicit individuals who provide personally identifiable information for a fee, allowing the fraudsters to enroll the fake students at educational institutions and collect financial aid refunds in their names.

Victims, meanwhile, are often unaware that the fraudsters have received student aid in their names.

According to FinCEN, banks may be able to identify fraud through deposits from educational institutions or contracted intermediaries. Payments from intermediaries are typically made through Automated Clearing House transfers, and transaction references may include the term “refund” and the educational institution’s name or abbreviation. The stated recipient also may be listed in the transaction reference.

Since the July alert, financial institutions have filed nearly 100 suspicious activity reports, the Treasury said. Meanwhile, FinCEN has identified more than 20,000 transactions since February by reviewing reports reflecting suspicious activity that has been identified and reported by financial institutions. These “should not be considered a complete representation of the scope of any particular type of suspicious activity,” and FinCEN has referred the information to law enforcement “as tip-and-lead information for further investigation,” the Treasury said.

The Treasury said it is working with the White House Task Force to Eliminate Fraud and will “continue to leverage financial intelligence, strengthen coordination across government, and pursue those who seek to profit by defrauding American taxpayers and harming legitimate students.”

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