FinCEN Alert on Federal Student Aid Fraud
On July 24th, FinCEN issued an Alert on “Fraud Schemes Targeting Federal Student Aid” (FIN-2026-Alert004). The Alert urges financial institutions to be on the lookout for and report any associated suspicious activity.
The Alert points out that approximately 13 million students benefit from Federal Student Aid programs that award more than $120 billion per year in the form of grants, work-study funding and low-interest loans. Law enforcement agencies report that …foreign and domestic fraud rings are…using…stolen personally identifiable information (PII) and complicit individuals to submit fraudulent enrollment applications to educational institutions and FAFSA submissions. These fraud rings often target …educational institutions that offer open admissions and online programs… The Alert details how fraudsters utilize ghost students, complicit straw students and insider-assisted fraud as well as the ways in which they attempt to launder the illegally obtained funds through the use of money mules, shell companies, fraudulent accounts and digital assets.
The Alert includes nine red flag indicators to help detect, prevent and report such activity.
When filing a SAR for such activity, FinCEN asks that financial institutions include the key term “FIN-2026-FSAFRAUD” in SAR Field 2 (Filing Institution Note to FinCEN) and the Narrative. Additionally, SAR Field 34(z) (Fraud – Other) should be marked and the term “Federal Student Aid Fraud” included in the text box.
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Published 2026/08/12
Amy Kudlacek
Amy brings many years of banking and compliance experience to Banker’s Compliance Consulting. She has worked for both large and small financial institutions and spent time working in every area of a bank. She started out as a teller in college and eventually became a branch manager. Her love, however, was always compliance. Amy began her career with Banker’s Compliance Consulting in 2000. Her knowledge and experiences have allowed her to develop a well-rounded and practical approach to regulatory compliance. Amy is CRCM certified, has a Bachelors Degree in Business Administration and is a graduate of the ABA Compliance School. Amy & her husband have two children at home and stay busy following their activities. They spend a lot of time in the bleachers!