DOJ’s New Comprehensive Approach Will Fight Fraud from All Angles

Key Takeaways

• As discussed in a prior BakerHostetler Insight,[1] earlier this year, the Department of Justice (DOJ or Department) created a new National Fraud Enforcement Division (Fraud Division or Division), led by Assistant Attorney General (AAG) Colin M. McDonald, who thereafter released a memorandum that outlined its key enforcement priorities. Earlier this month, as discussed in another BakerHostetler Insight, AAG McDonald released a follow-up memorandum to Fraud Division personnel that described the Division’s corporate enforcement priorities in greater detail, including its focus on “health care, government, tax, and trade fraud.”[2]
• On Oct. 7, AAG McDonald issued an additional memorandum to the Fraud Division that addresses fraud prosecutions more generally. It directs personnel to “deploy a comprehensive approach to combating, investigating, and prosecuting fraud in all forms.”[3] The DOJ describes this comprehensive approach as a “significant operational shift” and promises “to attack fraud from all angles [by] using the [Fraud] Division’s tax, securities fraud, consumer fraud, and cybercrime authorities.”[4]
• The memorandum builds on prior guidance by also directing the Fraud Division prosecutors to develop proactive cooperators; prioritize corporate enforcement; engage in a broad range of pre-indictment restraint of assets, including of bank accounts, cryptocurrency wallets and other financial instruments, as well as websites, domains and other digital property; prevent fraudsters from fleeing the country, through arrest, detention and early modification of release conditions; and engage in zealous sentencing advocacy to ensure “accountability, deterrence, victim protection, and financial recovery.”[5]
• The Fraud Division emphasizes its continued commitment to dismantling fraud schemes. The government seeks to accomplish this goal through aggressive charging decisions in appropriate cases, and deploying aggressive forfeiture and recovery principles, with the goal of “fully dismantl[ing]” fraud schemes and networks, “maximiz[ing] recoveries,” and “secur[ing] justice for the American people.” Similar to its stated objectives specific to the corporate-enforcement context, the Fraud Division is continuing to prioritize more broadly investigations and cases involving healthcare, government programs and procurement, tax, and trade. Companies and individuals should take note of this memorandum, which provides additional details about the Fraud Division’s focus and the tools it will employ. A wave of enforcement activity by the Fraud Division is anticipated. To reduce risk and ensure compliance, it is prudent for companies to conduct or refresh risk assessments, review their compliance policies and procedures – particularly those concerning healthcare, government contracts, tax and trade – and consider whether updates may be appropriate.

Key Details

Earlier this year, the DOJ announced its creation of the Fraud Division and tasked it to “zealously investigate and prosecute those who steal or fraudulently misuse taxpayer dollars.”[6] On Aug. 13, AAG McDonald released a memorandum that described the actions DOJ has taken to adequately resource the Division and outlined the Division’s enforcement priorities. On Oct. 1, AAG McDonald issued another memorandum to the Fraud Division that provided additional guidance specific to the investigation and prosecution of corporate entities.[7]

On Oct. 7, AAG McDonald released another memorandum (Memorandum), which further details the Fraud Division’s comprehensive approach to combating fraud. In the press release announcing the Memorandum’s release, DOJ noted that the Government Accountability Office estimated that the government loses between $233 billion and $521 billion to fraud annually.[8] The Division will therefore “mobilize all existing tools, deploy new tools, adopt innovative techniques, and steel [its] resolve to eliminate the fraud epidemic.”[9] DOJ described this comprehensive approach as a “significant operational shift” that will enable it to “bring to justice individuals and corporations who have defrauded the public fisc[] and threaten the health, safety, security, and prosperity of Americans.”[10]

First, the Memorandum directs the Fraud Division “to attack fraud from all angles [by] using the Division’s tax, securities fraud, consumer fraud, and cybercrime authorities.”[11]

• Tax Offenses. The Memorandum directs Fraud Division prosecutors, in every case, to consider whether a violation of internal revenue laws – either the failure to report or the failure to pay taxes – may have occurred. This directive meaningfully expands the Fraud Division’s prior investigatory mandate, ensuring that Division prosecutors also scrutinize the tax practices of companies and individuals it is investigating for potential fraud.[12]

• Securities Fraud. The Memorandum directs the Fraud Division’s Public Trust and Financial Integrity Section to leverage “analytical capabilities to correlate federal program, contract, and funding data against market activity,” thereby “creating an unprecedented intelligence function to generate proactive matters for the Division and its U.S. Attorney partners.”[13]^,[14] The Memorandum states that the Public Trust and Financial Integrity Section will “target and prioritize securities fraud schemes and market misconduct” identified by Fraud Division prosecutors in the “broader portfolio of cases involving taxpayer dollars and taxpayer-funded programs,” as well as the investigation and prosecution of cases involving the following:
  • Government programs or contracts
  • Schemes to defraud the U.S.
  • Foreign investment schemes targeting the federal government
  • Schemes targeting U.S. service members
  • Schemes involving healthcare, tax or trade fraud[15]

• Consumer Fraud and Cybercrime. The Memorandum explains that “[t]o protect vulnerable Americans and safeguard the integrity of the American marketplace and health care system,” the Fraud Division will focus on investigating and prosecuting frauds against the U.S. and the public fisc. Focal areas are similar to those identified for other types of fraud investigation; they include schemes involving government programs or contracts, healthcare, consumer products, medical devices, pharmaceuticals, and U.S. service members.[16]

• Asset Seizures and Injunctions Against Fraud. The Memorandum further directs Fraud Division prosecutors to pursue “aggressive forfeiture and recovery principles to ensure fraudulent proceeds are clawed back from fraudsters and returned to their rightful owners.”[17] It instructs the Fraud Division to prioritize the early seizure of fraud proceeds and the early disruption of ongoing schemes. The Fraud Division will work closely with the “Division’s Asset Recovery Section at all stages of investigations and prosecutions to advance the Division’s priorities.”[18] AAG McDonald expects the Asset Recovery Section to pursue the following pre- and post-indictment enforcement actions “to disrupt fraud schemes early, maximize recovery for victims, and dismantle fraudsters’ schemes and networks”:
  • Restraining orders or seizure letters to freeze assets in banks and cryptocurrency exchanges
  • Warrants and in rem forfeiture proceedings to seize assets before charges are filed
  • Warrants to seize digital property, including websites and domains
  • Civil actions to obtain restraining orders so that criminals cannot dispose of the proceeds from fraud
  • Civil actions to enjoin government fraud, banking law violations and healthcare offenses
  • Civil actions to obtain prejudgment remedies, including attachment and garnishment

Second, in addition to “attacking fraud from all angles,” the Memorandum directs prosecutors to prioritize the proactive cooperation of one or more participants in fraud schemes because it is “often critical to unraveling them and securing justice for crime victims.”[19] Prioritizing the development of proactive cooperators underscores the continued importance of whistleblowers and corporate self-reporting to DOJ’s comprehensive approach to fighting fraud. Of note, the Memorandum explains that cooperators “will not get a free pass.”[20] But Fraud Division prosecutors will continue to incentivize cooperation by promising to bring the cooperator’s assistance to the court’s attention at the appropriate time. In evaluating cooperation, among other things, prosecutors will consider whether the cooperator disclosed criminal activity previously unknown to law enforcement and whether the cooperation materially advanced an investigation, the seizure of criminal proceeds, the conviction of others and the disruption of ongoing harm.

Third, consistent with recent DOJ guidance, the Memorandum instructs Fraud Division prosecutors to “zealously prosecute corporate actors that defraud taxpayers and the United States of America.”[21] The Memorandum notes that the corporate enforcement program aims to “hold criminal entities accountable, further individual prosecutions, promote a culture of compliance and integrity, protect and foster honest and good-faith markets and institutions, protect law-abiding companies, and appropriately credit those that demonstrate a willingness to disclose misconduct, cooperate, and remediate.”[22]

Next, the Memorandum directs prosecutors to consider flight risk early in cases and seek arrest warrants and detention when appropriate. It also instructs Fraud Division prosecutors to reassess the terms of release if a defendant violates them.

Finally, the Memorandum outlines a set of principles that will guide the Fraud Division’s sentencing advocacy. It instructs Fraud Division prosecutors to avoid “mechanical” arguments at sentencing and instead use sentencing papers to “vividly recount the greed, lies, and deception underlying the crimes of conviction.”[23] Prosecutors are to pursue upward departures from the sentencing guidelines when appropriate and file appellate actions in cases in which the sentence does not reflect the seriousness of the offense.

Practical Considerations for Companies and Executives

The Memorandum emphasizes DOJ’s intent to undertake a comprehensive approach to fighting fraud, and its prioritization of both corporate and individual enforcement.[24] A significant uptick in fraud investigations and prosecutions is expected. In particular, companies should anticipate that investigations of potentially fraudulent conduct will also involve tax scrutiny. Given DOJ’s stated commitment to dismantling fraud schemes, companies and executives should consider incorporating this Memorandum and DOJ’s prior guidance into their risk assessments and reviewing their policies and procedures to ensure current compliance with the law. In light of this and other recent Fraud Division memoranda, prudent organizations will specifically review, among other things, policies, procedures and practices related to (1) tax compliance; (2) healthcare compliance, including billing and the marketing of goods and services; (3) import and export compliance; (4) government contracting and procurement compliance; (5) antitrust compliance; (6) sanctions compliance; (7) accounting and disclosure; and (8) employee conduct and investigations.[25] Companies should also consider how asset seizures or injunctions early in an investigation could affect financial obligations and business operations.

The BakerHostetler White Collar, Investigations and Securities Enforcement and Litigation and the Criminal Tax Defense teams are composed of dozens of experienced individuals, including numerous attorneys who have served in the DOJ and at the SEC. Our attorneys include four former U.S. attorneys, several former assistant U.S. attorneys and unit chiefs, attorneys who served in DOJ’s Tax Division, and attorneys who have served in the SEC’s Division of Enforcement. Our teams have extensive experience in defending regulatory investigations and litigation, conducting enterprise-wide and business-line and regulatory area-specific risk assessments, and providing compliance counseling.

Please feel free to contact any of our experienced professionals if you have questions about this alert.

[1] BakerHostetler Insights: Assistant Attorney General Memorandum to Fraud Division Outlines Division’s Key Enforcement Priorities(https://www.bakerlaw.com/insights/assistant-attorney-general-memorandum-to-fraud-division-outlines-divisions-key-enforcement-priorities/). 

[2] Memorandum from Assistant Att’y Gen. Colin M. McDonald, Directive 26-12 – Corporate Enforcement in the Fight Against Fraud (Oct. 1, 2026), available at https://www.justice.gov/opa/media/1463571/dl?inline.

[3] Memorandum from Assistant Att’y Gen. Colin M. McDonald, Directive 26-13: A Comprehensive Approach in the Fight Against Fraud (Oct. 7, 2026), available at  https://www.justice.gov/opa/media/1465036/dl?inline=&utm_medium=email&utm_source=govdelivery.

[4] Press Release, Dep’t of Justice, Assistant Att’y Gen. Colin M. McDonald Issues Memorandum on the Nat’l Fraud Enforcement Division’s Comprehensive Approach in the Fight Against Fraud (Oct. 8, 2026), available at  https://www.justice.gov/opa/pr/assistant-attorney-general-colin-m-mcdonald-issues-memorandum-national-fraud-enforcement-1.             

[5] Memorandum from Assistant Att’y Gen. Colin M. McDonald, Directive 26-13: A Comprehensive Approach in the Fight Against Fraud, (Oct. 7, 2026), available at https://www.justice.gov/opa/media/1465036/dl?inline=&utm_medium=email&utm_source=govdelivery.

[6] Memorandum from Acting Att’y Gen. Todd Blanche, Creation of the National Fraud Enforcement Division (April 7, 2026), available at https://www.justice.gov/ag/media/1435311/dl?inline.

[7] Memorandum from Assistant Att’y Gen. Colin M. McDonald, Directive 26-12 – Corporate Enforcement in the Fight Against Fraud (Oct. 1, 2026), available at https://www.justice.gov/opa/media/1463571/dl?inline. While the Fraud Division notes that it will continue to work closely with U.S. Attorneys’ Offices across the county and other Main Justice components, the directives in this and AAG McDonald’s other memoranda apply only to matters supervised by the Fraud Division.

[8] Press Release, Dep’t of Justice, Assistant Att’y Gen. Colin M. McDonald Issues Memorandum on the Nat’l Fraud Enforcement Division’s Comprehensive Approach in the Fight Against Fraud (Oct. 8, 2026), available at https://www.justice.gov/opa/pr/assistant-attorney-general-colin-m-mcdonald-issues-memorandum-national-fraud-enforcement-1.             

[9] Memorandum from Assistant Att’y Gen. Colin M. McDonald, Directive 26-13: A Comprehensive Approach in the Fight Against Fraud (Oct. 7, 2026), available at https://www.justice.gov/opa/media/1465036/dl?inline=&utm_medium=email&utm_source=govdelivery.

[10] Press Release, Dep’t of Justice, Assistant Att’y Gen. Colin M. McDonald Issues Memorandum on the Nat’l Fraud Enforcement Division’s Comprehensive Approach in the Fight Against Fraud (Oct. 8, 2026), available at https://www.justice.gov/opa/pr/assistant-attorney-general-colin-m-mcdonald-issues-memorandum-national-fraud-enforcement-1.             

[11] Id.

[12] Id.

[13] Memorandum from Assistant Att’y Gen. Colin M. McDonald, Directive 26-13: A Comprehensive Approach in the Fight Against Fraud (Oct. 7, 2026), available at https://www.justice.gov/opa/media/1465036/dl?inline=&utm_medium=email&utm_source=govdelivery.

[14] The Memorandum notes that none of the directives are intended to alter the relationship between Main Justice and the U.S. Attorneys’ Offices, which often work in coordination to investigate securities fraud cases. Id.

[15] Id.

[16] Id.

[17] Id.

[18] Id.

[19] Id.

[20] Id.

[21] Id.

[22] Id.

[23] Id.

[24] Id.

[25] Importantly, the statutes of limitations for employee misconduct continue to run notwithstanding DOJ’s current priorities. Companies should continue to be diligent about compliance in all areas and forms.