FinCEN Highlights Healthcare Fraud Red Flags for Financial Institutions

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has highlighted the growing financial crime risks associated with healthcare fraud, including schemes that exploit hospice care services, and has urged financial institutions to strengthen detection and reporting controls.

On August 17, FinCEN brought together law enforcement agencies and financial institutions in Los Angeles to discuss emerging healthcare benefits fraud schemes targeting Medicare and Medicaid. The engagement focused on financial typologies, red-flag indicators, and opportunities to raise awareness of hospice-related fraud.

The development is particularly relevant to AML teams because healthcare fraud can generate complex financial flows involving providers, beneficiaries, intermediaries, and connected businesses across multiple jurisdictions.

Healthcare Fraud Creates an Evolving AML Risk

FinCEN said healthcare fraud involving Medicare and Medicaid continues to increase in scale and complexity, with schemes involving both domestic fraud networks and transnational criminal organizations.

For financial institutions, this means healthcare fraud should not be viewed solely as a sector-specific issue. Fraudulent proceeds can move through multiple accounts and entities, making individual transactions appear legitimate when assessed in isolation.

FinCEN’s focus on typologies and red flags therefore reinforces the importance of combining transaction monitoring with broader customer and entity risk assessments.

BSA Data Can Support Fraud Investigations

On August 18, FinCEN also conducted training for law enforcement on the use of Bank Secrecy Act (BSA) data to combat fraud.

The focus demonstrates how financial intelligence can help authorities identify connections between suspicious accounts, businesses, jurisdictions, and transaction patterns. Accurate reporting of suspicious activity can provide important intelligence when fraud proceeds move through complex networks.

FinCEN also highlighted information sharing between financial institutions and law enforcement as an important tool for identifying and disrupting financial crime.

What Financial Institutions Should Watch

FinCEN’s emphasis on healthcare fraud typologies serves as a clear reminder for compliance teams to assess whether existing AML and transaction monitoring controls can identify suspicious activity involving healthcare-related customers and connected entities.

Potential indicators should be assessed alongside customer risk, transaction behavior, geographic exposure, business activity, and known relationships rather than treated as isolated red flags.

Why This Matters for AML Compliance

The latest FinCEN engagement reinforces the growing convergence between fraud detection and AML monitoring. As organized fraud networks become more sophisticated, financial institutions can play a critical role in identifying the movement of illicit proceeds.

For AML teams, the message is clear: healthcare fraud can pose significant risks of money laundering and financial crime. Strong typology awareness, meaningful red-flag detection, effective transaction monitoring, accurate BSA reporting, and information sharing can help institutions identify suspicious activity before fraudulent proceeds move further through the financial system.