As we move into 2026, agency leaders across local, state, and federal government must confront a rapidly evolving fraud landscape shaped by new enforcement priorities, legislative proposals, and updated risk management guidance. From sweeping federal initiatives to targeted anti-fraud operational practices, the directives issued in late 2025 and early 2026 signal a clear message: Fraud prevention isn’t just compliance, it’s a strategic mission.
A New Federal Fraud Enforcement Architecture
In January 2026, the White House announced the establishment of a new Department of Justice Division for National Fraud Enforcement, a dedicated, centralized body tasked with prosecuting fraud affecting federal programs, federally funded benefits, businesses, nonprofits, and individual citizens. This division is designed to coordinate multi-district, multi-agency investigations and elevate anti-fraud priorities nationwide, including advising U.S. Attorneys on significant fraud cases and recommending reforms to modernize enforcement across jurisdictions.
What Leaders Should Do Now:
- Prepare for increased DOJ engagement on large-scale fraud matters.
- Align internal compliance and investigative teams with anticipated national enforcement priorities.
- Review cross-agency data sharing and case referral processes to ensure readiness for coordinated investigations.
Legislative Momentum: Tougher Penalties on the Horizon
In Congress, the newly introduced Stop Fraud in Federal Programs Act of 2026 aims to significantly increase penalties for theft or bribery involving federal funds, boosting maximum imprisonment terms and fines for offenders.
Local and state agencies that administer or oversee federally funded programs, including grants, Medicaid, education, and infrastructure awards, must anticipate heightened scrutiny and potential enforcement activity tied to misuse of funds. Enhanced penalties signal not just tougher enforcement but also higher stakes for internal oversight failures.
Action Steps:
- Assess internal controls and audit functions against evolving statutory expectations.
- Ensure grant and fund administrators understand the increased legal risks and reporting expectations.
Evolving Fraud Risk Guidance and Leading Practices
Beyond enforcement, agencies are encouraged, and in some cases required, to adopt robust fraud risk management practices. Recent Government Accountability Office (GAO) reports emphasize implementing leading practices from the Fraud Risk Framework, which stresses proactive risk assessments, controls integration, and continuous evaluation of antifraud effectiveness.
Similarly, federal reports assessing oversight of large award programs exposed gaps in fraud prevention policies and procedures, issuing a dozen recommendations for better fraud risk mitigation in agencies overseeing federal funds.
Recommendations for Leaders:
- Integrate fraud risk assessments into enterprise risk management.
- Document controls and evidence of testing, evaluation, and corrective action.
- Embed antifraud expectations into program performance metrics and audit plans.
Sector-Specific Monitoring Examples: Financial and Payments Systems
In the private and financial sectors, rule amendments under Nacha’s Fraud Monitoring Phase 2 (effective mid-2026) require origins, processors, and receiving depositories to implement enhanced fraud monitoring and reporting mechanisms across Automated Clearing House (ACH) transactions.
While this guidance originates outside of government agencies, the impact resonates for public entities engaged in financial disbursements or payments, particularly those leveraging ACH for benefits, vendor payments, or refunds. Governments should proactively evaluate their third-party payment partners and internal monitoring protocols to remain compliant and mitigate exposure.
Enforcement Shifts in Regulatory Agencies
Regulators like the Commodity Futures Trading Commission (CFTC) are recalibrating their enforcement focus toward intentional fraud rather than purely technical compliance violations. Recent enforcement statistics show a marked shift in action prioritization, with fewer technical penalties and more emphasis on clear fraud indicators.
Agency leaders should interpret this as a broader trend: Regulators want to see that entities are actively managing fraud risks, not merely checking procedural boxes.
Cross-Cutting Themes for Executive Leaders
Across these developments, several common themes emerge for senior agency leaders:
- Fraud is now a strategic priority: It’s no longer siloed in audit or legal offices. Leaders must embed fraud thinking into financial operations, IT systems, program delivery, and governance frameworks.
- Data and analytics will be central: Proactive detection and early warning systems, supported by cross-organizational data flows, are becoming de facto expectations.
- Collaboration matters: New enforcement structures and guidance emphasize interagency information sharing and joint cases. Agencies that build strong relationships with federal partners, state counterparts, and law enforcement will be better positioned to respond to emerging threats.
From Compliance to Culture
The era of passive fraud compliance is ending. The directives and guidance emerging in this period reflect a federal government ready to invest new resources, elevate consequences, and modernize approaches to combat fraud. For executive leaders, the mandate is clear: Pivot from reactive oversight to proactive enterprise-wide antifraud strategies that protect public trust and public dollars.
A Practical 30-Day Executive Fraud Readiness Challenge
Over the next 30 days, agency leaders can materially reduce fraud risk without launching a new program by taking four focused actions: First, convene a brief executive session to identify the agency’s top fraud exposure points, funding, benefits, procurement, grants, payments, or data access, and ask where fraud could occur today without detection. Second, run a short tabletop scenario simulating a realistic fraud incident to test detection speed, decision authority, and escalation paths. Third, fix one high-impact gap uncovered, such as unclear decision rights, delayed notification, or fragmented data visibility, immediately. Finally, issue a one-page executive fraud posture memo defining risk tolerance, ownership, and review cadence. Together, these steps shift fraud response from passive compliance to active leadership accountability and build measurable resilience in weeks, not years.
Dr. Rhonda Farrell is a transformation advisor with decades of experience driving impactful change and strategic growth for DoD, IC, Joint, and commercial agencies and organizations. She has a robust background in digital transformation, organizational development, and process improvement, offering a unique perspective that combines technical expertise with a deep understanding of business dynamics. As a strategy and innovation leader, she aligns with CIO, CTO, CDO, CISO, and Chief of Staff initiatives to identify strategic gaps, realign missions, and re-engineer organizations. Based in Baltimore and a proud US Marine Corps veteran, she brings a disciplined, resilient, and mission-focused approach to her work, enabling organizations to pivot and innovate successfully.
Leave a Reply
You must be logged in to post a comment.