FinCEN's Advisory on Healthcare Fraud: Steps for Financial Institutions

In late March, the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) issued an Advisory urging financial institutions to enhance vigilance concerning transactions potentially linked to healthcare fraud schemes. These schemes frequently target Medicare, Medicaid, and related federal and state programs. Collaborating with the FBI and the U.S. Department of Health and Human Services Office of Inspector General, the Advisory reveals methods used by medical professionals and criminal organizations to exploit these benefits, subsequently laundering the proceeds through both domestic and international financial systems.

FinCEN's Advisory underscores the significant impact of fraud, including healthcare-related fraud, on generating illicit proceeds in the United States as noted in the Treasury’s 2026 National Money Laundering Risk Assessment. Financial institutions engaged with healthcare providers must actively address this pervasive type of fraud. Institutions are encouraged to implement strong anti-fraud strategies as part of their risk management efforts.

The Advisory details how fraudulent activities often involve shell companies, straw owners, and fake ownership details to create entities that fraudulently bill government programs. Sectors like durable medical equipment suppliers, hospice care companies, pharmacies, and telemedicine are particularly vulnerable. Fraudsters may submit false claims or use phantom billing, upcoding, and unbundling, sometimes offering kickbacks to complicit professionals.

Funds derived from fraudulent claims are typically moved quickly through transactions, including digital asset conversion and international transfers. The Advisory warns of potential internal collusion within financial institutions aiming to bypass anti-money laundering (AML) controls. It outlines healthcare fraud schemes, laundering methods, and red flag indicators to help financial institutions identify suspicious transactions effectively.

To support institutions, the Advisory provides a comprehensive overview and stresses aligning reimbursement activities with recognized business models. When filing Suspicious Activity Reports (SARs), institutions are encouraged to use specific terms related to healthcare fraud. Moreover, there is a growing focus on fraud in government-funded programs, highlighting the importance of addressing involvement by transnational criminal organizations.

Financial institutions are advised to reassess their AML programs for effectively addressing healthcare-related risks. This reassessment might involve refining onboarding procedures, ownership verification, and monitoring for billing irregularities. Meanwhile, healthcare entities should bolster their diligence processes to align with regulatory compliance requirements and maintain robust internal records.

This emphasis on tackling healthcare fraud is part of broader governmental efforts to control fraud, waste, and abuse in federal payment programs, particularly within healthcare. Continued vigilance and collaboration between financial institutions and government bodies are essential in addressing these ongoing challenges.