Legal Insight

The DOJ Just Supercharged Fraud Enforcement: If You Receive Federal Funds, Is Your Business Ready?

If your business receives funds from the federal government, now is the time to prepare your compliance program for increased federal scrutiny. The White House has announced a new war on fraud and more than a few businesses and individuals will find themselves in the government’s crosshairs this time around.  Companies and individuals that operate in health care, government contracting, international trade, and any sector engaged with federal programs, funds, or regulators need to prepare for the scrutiny to come by assessing and updating their compliance programs, data management, and investigative protocols.

The DOJ’s New Fraud Enforcement Infrastructure

In April 2026, the Department of Justice established the National Fraud Enforcement Division (NFED) by consolidating several previously existing DOJ divisions into one new division dedicated exclusively to fraud enforcement.  Headed by Assistant Attorney General Colin McDonald, this new division is tasked to “zealously investigate and prosecute those who steal or fraudulently misuse taxpayer dollars” as part of an unprecedented “comprehensive and coordinated approach,” according to the memo announcing the new division.  The Department is making a considerable investment in the NFED, including plans to significantly grow the Division to approximately 500 attorneys and staff this year, with continued aggressive expansion over the next two years.  The Department is also devoting significant resources in the form of the development of a National Fraud Detection Center, and dedicating data scientists, specialized investigators, asset recovery attorneys, and a privilege review team to the cause. This new fraud model represents a “supercharging” of the Health Care Fraud Strike Force model that resulted in the largest takedowns of healthcare fraud in DOJ history.

In mid-August 2026, AAG McDonald issued a memorandum (the “McDonald Memo”) outlining the NFED’s priorities – required reading for all who receive federal program funds or operate in a federally regulated space. Throughout the McDonald Memo and across all enforcement priorities, several themes stand out.  First, the NFED is intended to create a foundational change in the investigation of white-collar crime through cross-disciplinary collaboration and reduced bureaucratic oversight. Second, conduct traditionally viewed as a civil compliance issue may now present a criminal fraud risk, especially conduct touching on customs and trade.  Third, investigations pursued by the NFED will be increasingly data driven. The McDonald Memo strongly emphasizes the importance of data analytics and clearly signals that the NFED is set up to build cases using technological tools to identify fraud.

The Five Priorities

The McDonald Memo identifies five enforcement priorities for the NFED’s work, together described as encompassing the “frauds that pose the greatest threats to the American public.” We’ll discuss each priority below, setting out specific focus categories in each, and note which corporate actors and professionals could be impacted by the new or renewed federal attention.

Priority 1: Public Trust and Financial Integrity

This priority, framed in the McDonald Memo as central to safeguarding taxpayer dollars, targets fraud in government programs and procurement. From contractor fraud and bribery to fraud impacting benefit and grant programs such as veterans’ benefits, student loans, and disaster relief, the priority targets here are those who receive payment from the federal government.

Categories of Focus:

• Government Procurement Fraud
• Fraud affecting Government Programs
• Fraud affecting market integrity and/or compromising the financial wellbeing of American consumers

Who Is Impacted:

Companies and individuals that receive government funds in any form. This includes government contractors and subcontractors of any sort, defense-based or otherwise, and federal grant and benefit program participants. The McDonald Memo also places a specific enforcement emphasis on foreign national targets within this priority area.  

Priority 2: Healthcare

Already the most targeted industry for federal scrutiny, the McDonald Memo reiterates that healthcare fraud and abuse remains a key priority and directs greater resources to fraud, waste, and abuse prevention efforts within the NFED.

Categories of focus:

• Telemedicine fraud
  • Medicare and Medicaid fraud
  • Controlled substance diversion
  • Home health and hospice fraud
  • Deceptive marketing of unsafe products and services

Who Is Impacted:

All who operate within the healthcare industry, including healthcare providers and companies, physicians, pharmacists, laboratory companies, and medical equipment suppliers.

Priority 3: Internal Revenue

This priority targets those who “lie to the IRS, cheat the federal government out of lawful revenue, and steal money that would otherwise fund national priorities”, including unethical return preparers, income concealers, and abusive promoters of illegal tax schemes.  The McDonald Memo also observes that those who steal from government programs "simultaneously violate our internal revenue laws," and commits the NFED to “creating an all-tools response to fraud enforcement.”  In practice, this stacking of criminal tax charges means that anyone under investigation in any other priority area can anticipate a wholesale review of their tax returns and payment history. 

Categories of Focus:

• Unethical return preparers and promoters of illegal tax schemes
• Income concealment
• Tax fraud committed as part of other government program fraud

Who Is Impacted:

Tax return preparers and promotors, business owners, and those who create or employ sophisticated tax shelters and corporate structures designed to minimize federal tax liability.   Given the McDonald Memo’s overlay of violations of internal revenue laws onto government program fraud, companies should also anticipate that investigations originating in other priority areas, such as healthcare or federal grant or benefit fraud, may quickly develop additional tax dimensions.

Priority 4: Global Trade and Commerce

Higher tariff levels have increased the financial incentives to evade customs duties, making this conduct a significant white-collar criminal risk. The McDonald Memo makes clear that federal law enforcement has already adjusted its focus to address this risk, elevating what was once treated as a technical trade issue into a top criminal enforcement priority.  Accordingly, the focus of the NFED’s global trade and commerce priority is on trade fraud and customs evasion, with plans to utilize long-established but previously less-employed criminal statutes such as those prohibiting smuggling or the entry of goods into the United States by means of false statements or the payment of less than the legally due duty.

To pursue these cases, the NFED intends to coordinate with the already established Trade Fraud Task Force, a unit which combines the talent and expertise of both the Civil and Criminal Divisions of DOJ and the Department of Homeland Security.

Categories of Focus:

• Illicit transshipment schemes
• Country-of-origin fraud
• Undervaluation of imports to evade duties (e., tariff evasion)
• Sanctions evasion
• Foreign forced labor schemes

Who Is Impacted:

All involved in global trade and commerce, including importers/exporters, customs brokers, global logistics providers and businesses with overseas manufacturing.

Priority 5: Corporate Misconduct

The final priority targets corporate misconduct, pledging the NFED to hold “accountable organizations that flaunt the law” without identifying specific areas of corporate enforcement. This broadly scoped language gives the NFED significant flexibility to pursue wide-ranging investigations and prosecutions as its corporate misconduct priorities develop.

The McDonald Memo ominously discloses that the NFED has “a strong pipeline of ongoing corporate matters” while also emphasizing that it will apply the Department-wide Corporate Enforcement Policy announced in March 2026 to reward “those that voluntarily self-disclose, cooperate, and remediate.”   This serves as a warning to any company considering voluntary self-disclosure: the true value of such disclosure lies in getting to the DOJ before the DOJ gets to you.

Who Is Impacted:

Companies of all kinds, especially those whose work touches on any of the other NFED enforcement priorities. 

Implications & How to Respond

The creation of the NFED and the McDonald Memo make clear that the Department is now emphasizing criminal fraud prosecution in addition to traditional civil remedies in all its priority areas.  In some areas, this represents a marked change, and those within the NFED’s ambit should anticipate that once civil matters may now, at minimum, result in increased scrutiny under parallel civil and criminal investigations.  The Department is marshaling an unprecedented level of resources to its fight against fraud; potential targets should assume there will be zero tolerance for compliance missteps and that large, headline-grabbing verdicts and settlements are coming soon. 

Prepare.  The good news to be found in the McDonald Memo is that the law itself remains the same; it is only the governmental resources and focus that have shifted.  To prepare, companies need to evaluate and stress test their compliance programs and promptly address any deficiencies.  Given the NFED’s focus on data analytics—and its likely use of artificial intelligence tools—companies that receive federal program funds or do business with the federal government should scrutinize their own internal data now to identify and address anomalies or concerns before they become the basis for an investigation.

Be aware.  Companies should be aware that the first sign of an NFED investigation likely won’t come in the form of a public announcement, but rather by way of a subpoena, civil investigative demand, or audit of government program dollars. The time to consult counsel is before that moment arrives. 

Reach out.  For further guidance on how the NFED’s Five Enforcement Priorities may impact you and your business, connect with McBrayer’s Government Investigations Team.  Should you receive a subpoena or investigative demand, legal guidance early in the process is vital to protecting you and your business.

Stephanie Zimdahl is a Member at McBrayer who advises companies and executives facing government investigations, regulatory scrutiny, internal investigations, and other high-stakes disputes where legal, operational, and reputational risks intersect. A seasoned trial attorney with extensive jury trial experience, she focuses her practice on white collar defense, healthcare fraud and regulatory enforcement, employment-related investigations, professional liability defense, and complex business litigation. She can be reached at szimdahl@mcbrayerfirm.com or (502) 327-5400.