On July 24, FinCEN issued an alert, in consultation with the FBI and the Department of Education’s (ED’s) OIG, urging financial institutions to detect, identify and report suspicious activity connected to fraud schemes targeting ED’s Office of Federal Student Aid (FSA) programs. The alert explained that fraud rings use stolen and fraudulent identities and other tactics to enroll “ghost students” and complicit “straw students” in educational institutions in order to obtain federal student aid refunds unlawfully, with some fraudsters allegedly using AI to generate synthetic identities and complete coursework on victims’ behalf. FSA awards more than $120 billion per year in grants, work-study funds, and low-interest loans to approximately 13 million students, and ED reported it prevented $1 billion in federal student aid fraud in 2025.

The alert noted that fraudsters may use “money mules,” shell companies, digital assets, and fraudulent accounts to transfer and launder illicitly obtained student aid refunds, and it referenced President Trump’s March 2025 executive order declaring it “the policy of the United States to defend against financial fraud and improper payments” that threaten the integrity of federal programs. Among the red flag indicators FinCEN identified are accounts with no enrollment history receiving a student aid refund tied to an unrelated individual, newly established accounts funded solely by student aid refunds, and multiple accounts opened online in a short timeframe that each receive a refund on a one-to-one basis. FinCEN requested that financial institutions include the key term “FIN-2026-FSAFRAUD” in both SAR field 2 and the narrative; select “SAR Field 34(z) (Fraud – Other)”; and include the term “Federal Student Aid Fraud” in the text box. The alert also reminded financial institutions of their existing BSA obligations, including SAR filing, customer due diligence, and information-sharing requirements.