Scope - What This Guide Covers
This guide translates the National Fraud Division's 10 prosecution factors into actionable criteria for your team's risk assessments. It's especially useful for those involved with government contracts, healthcare programs, or other federally funded work, but the frameworks apply to any fraud risk assessment.
You'll find requirement breakdowns, implementation steps, and a quick-reference table for use during quarterly risk reviews or when deciding whether to escalate a potential fraud issue.
What this guide doesn't cover: The Corporate Enforcement Policy itself or non-fraud enforcement priorities handled by other DOJ divisions.
Key Concepts and Definitions
National Fraud Division: The DOJ division established in April to prosecute government benefits fraud. Led by Assistant Attorney General Colin McDonald, it absorbed functions previously handled by the Criminal Division's Fraud Section.
Corporate Enforcement Policy: The DOJ framework that offers no charges to companies that self-disclose misconduct, cooperate fully, and fix internal control failures. This policy remains unchanged.
Multi-district fraud: Schemes affecting three or more federal U.S. attorney districts. This indicates scale and coordination, both of which draw prosecutorial attention.
Taxpayer-funded programs: Government contracts, Medicare/Medicaid billing, federal grant programs, defense contracts, or any arrangement where federal funds flow to your organization.
Requirements Breakdown
The National Fraud Division's memo lists 10 factors influencing prosecution decisions. Here's how to view them as risk indicators:
Senior management involvement: Were executives aware of or participating in the scheme? This increases both culpability and prosecution likelihood.
Concealment from oversight: Was misconduct hidden from auditors, regulators, or government agencies? Active concealment suggests intent.
Duration of three years or more: Long-running schemes indicate systemic control failures, not isolated incidents.
Geographic scope: Does the fraud affect three or more U.S. attorney districts? Wide distribution suggests coordination and scale.
Victim count or financial threshold: Did the misconduct harm 25 or more victims or cause $25 million or more in losses? These thresholds signal materiality.
Multiple program impact: Does the scheme affect multiple taxpayer-funded programs or government functions? Cross-program fraud indicates sophisticated schemes.
Foreign adversary payments: Did money flow out of the country to support foreign adversaries? This combines fraud with national security concerns.
Substantial program hardship: Did the fraud cause significant financial strain to a government program or function?
Safety or security threats: Does the misconduct threaten Americans' safety, including military readiness?
Immigration offenses: Does the scheme involve immigration-related fraud?
Implementation Guidance
Adjust Your Risk Assessment Matrix
Incorporate these factors as severity multipliers in your existing fraud risk framework. A $10 million procurement fraud that crosses four districts and involves VP-level concealment scores higher than a $10 million fraud in one location with no management involvement.
Practical step: During your next risk assessment cycle, score each fraud scenario against these 10 factors. Assign 1-3 points per factor present, then use the total to prioritize controls and monitoring.
Build Cross-District Forensic Capability
If you discover fraud in one office, you need the ability to quickly assess whether the same scheme exists elsewhere.
What this requires:
- Transaction data you can query across business units and geographies
- Hotline intake procedures that flag similar allegations from different sources
- Audit rights in contracts that let you examine third-party books across multiple locations
- Forensic accounting tools that can match patterns across disparate systems
Example scenario: If you discover overbilling on a federal contract in Texas, can you immediately pull billing records from your Florida and Virginia offices to check for the same pattern? If not, you're missing a core capability the Fraud Division expects.
Strengthen Multi-Program Analysis
Government contractors often support multiple agencies or programs, each with different billing rules, compliance requirements, and oversight mechanisms.
Practical step: Map which government programs your company supports. Document the distinct financial controls for each. When fraud surfaces in one program, your investigation protocol should include checking other programs for similar schemes.
This isn't about assuming guilt everywhere. It's about demonstrating thoroughness when you self-disclose. The worst outcome is disclosing one fraud, cooperating fully, and then having investigators discover a second fraud you missed because you didn't look.
Revise Escalation Thresholds
Your current escalation policy might trigger legal review at $5 million in potential losses. The Fraud Division's $25 million threshold doesn't mean you should raise yours. It means you should add other factors to your escalation criteria.
Recommended escalation triggers:
- Any scheme involving VP-level or higher management
- Any fraud affecting multiple districts or programs
- Any evidence of concealment from auditors or regulators
- Any scheme lasting longer than 18 months
Document Management Awareness
When investigating potential fraud, document what senior leaders knew and when they knew it. This isn't about building a prosecution case against your own executives. It's about having facts ready if you need to self-disclose.
What to capture:
- Email trails showing who received which reports
- Meeting minutes where the issue was discussed
- Dates when specific executives were briefed
- Actions taken (or not taken) after notification
Common Pitfalls
Pitfall 1: Treating the $25 million threshold as a safe harbor. Don't assume frauds under $25 million won't draw attention. The 10 factors work together. A $10 million fraud with senior management involvement and multi-district impact still scores high.
Pitfall 2: Siloed investigations. Your healthcare compliance team discovers billing fraud but doesn't loop in the team managing defense contracts. Now you've missed the "multiple programs" factor entirely.
Pitfall 3: Underestimating geographic scope. Your company has offices in eight states, but you think of yourself as a single enterprise. Prosecutors think in terms of U.S. attorney districts. A scheme touching offices in Texas, Florida, and Virginia affects three districts even if it's one company.
Pitfall 4: Waiting for certainty before escalating. You don't need proof of all 10 factors before involving legal. If you spot three or four factors during preliminary review, escalate immediately.
Pitfall 5: Ignoring duration. A fraud scheme you discovered after six months is easier to remediate and disclose than one that's been running for three years. Build monitoring that detects anomalies faster.
Quick Reference Table
| Factor | Risk Indicator | What to Document | Escalation Trigger |
|---|---|---|---|
| Senior management involvement | VP-level or higher aware or participating | Email trails, meeting minutes, briefing dates | Any credible allegation |
| Concealment from oversight | Hiding from auditors, regulators, or agencies | Audit work papers, regulator correspondence | Immediate |
| Duration ≥3 years | Scheme timeline extends beyond 36 months | Transaction start dates, pattern analysis | 18+ months of activity |
| Multi-district (≥3) | Affects three or more U.S. attorney districts | Office locations, transaction geography | Two or more districts |
| Victims ≥25 or losses ≥$25M | Victim count or financial impact meets threshold | Victim lists, financial impact analysis | 15+ victims or $15M+ |
| Multiple programs | Touches multiple taxpayer-funded programs | Program mapping, contract inventory | Two or more programs |
| Foreign adversary payments | Money sent to support foreign adversaries | Wire transfer records, recipient analysis | Any credible evidence |
| Substantial program hardship | Material financial strain on government function | Program budget impact, agency communications | Agency raises concern |
| Safety/security threats | Threatens Americans' safety or military readiness | Incident reports, safety assessments | Any credible threat |
| Immigration offenses | Involves immigration-related fraud | Visa records, employment verification | Any credible allegation |
How to use this table: During investigation triage or risk assessment reviews, check each factor. Document what you find. If three or more factors are present, treat it as high-priority and involve legal counsel immediately. Remember, the Corporate Enforcement Policy rewards self-disclosure, cooperation, and remediation. These factors help you recognize when you're looking at something the Fraud Division will care about.
