FILE PHOTO: U.S. Treasury Secretary Scott Bessent looks on as he speaks to the media, following the trade talks between the U.S. and China, in Kuala Lumpur, Malaysia October 26, 2025. REUTERS/Hasnoor Hussain/File Photo/File Photo

Dec 1 (Reuters) - The U.S. Treasury Department is investigating allegations that tax dollars from Minnesota may have been diverted to the Al-Shabaab militant group in Somalia, Treasury Secretary Scott Bessent said on Monday.

Bessent announced the investigation on X days after U.S. President Donald Trump called Minnesota a "hub of fraudulent money laundering activity" under Democratic Governor Tim Walz, an apparent response to unverified media reports shared by several Republican lawmakers that Al-Shabaab had benefited from fraud committed in Minnesota.

"At my direction, the Treasury Department is investigating allegations that under the feckless mismanagement of the Biden Administration and Governor Tim Walz, hardworking Minnesotans’ tax dollars may have been diverted to the terrorist organization Al-Shabaab," Bessent said.

Walz's office did not immediately respond to a request for comment from Reuters. He has previously said Trump was demonizing the entire Somali community.

In an interview aired on NBC News on Sunday, Walz was asked about Trump's allegations and convictions of dozens of people of East African descent in fraud-related cases involving COVID-era government programs. Walz said Minnesota attracts criminals who get prosecuted.

"I will note, it's not just Somalis. Minnesota is a generous state. Minnesota is a prosperous state ... But that attracts criminals. Those people are going to jail," Walz said.

"But to demonize an entire community on the actions of a few, it's lazy," he added.

Last month, Trump announced that he was terminating temporary deportation protections for Somalis living in Minnesota, saying "Somali gangs are terrorizing" people in the U.S. state. The move accelerates the end of a program that began in 1991 under another Republican president.

The administration of Trump's Democratic predecessor, Joe Biden, extended the eligibility for Somalis through March 17, 2026. Most of Minnesotans of Somali heritage are U.S. citizens, and there are only 705 Somali-born individuals nationwide who have TPS status, according to a report by the non-partisan Congressional Research Service.

(Reporting by Christian Martinez and Ismail Shakil; editing by Costas Pitas and Caitlin Webber)