In early October, Assistant Attorney General Colin McDonald, head of the Department of Justice’s National Fraud Enforcement Division, issued Directive 26-12, centralizing corporate enforcement coordination and review oversight within the Division’s Corporate Enforcement Section (CES).

Following the establishment of the Fraud Division earlier this year, the Directive builds on the DOJ’s efforts to combat corporate fraud by defining the CES’s role in corporate investigations and overseeing compliance with corporate resolutions. It supplements existing Department-wide corporate enforcement policies by delineating clearer roles within the newly formed Fraud Division.

Key Client Takeaways in the Wake of the DOJ’s Fraud Reorganization

• The Fraud Division is now tasked with significant enforcement functions previously handled by the Criminal Division, but the reorganization does not place all DOJ fraud matters under its supervision. For clients facing an investigation, identifying the responsible component and whether the Fraud Division supervises the matter is important to understanding CES’s role.
• Fraud Division prosecutors are instructed to prioritize health care, government-related, revenue, and trade fraud schemes. These priorities identify the Division’s enforcement and focus; they do not create new substantive offenses or require every company in those sectors to undertake a new compliance review.
• Prosecutors are to place “great weight” on 10 factors, including knowledge by corporate management of fraud schemes, conduct affecting three or more federal districts, and conduct furthering the scheme over the span of three or more years. For clients assessing a matter or presenting a position on charging or resolution, these considerations should be addressed alongside cooperation, remediation, and other relevant factors under existing Department policy.
• The CES’s role spans investigations, litigation, and resolutions, with separate primary responsibility for evaluating compliance with corporate criminal resolutions. Clients in Fraud Division matters should account for CES participation during the case and its oversight of compliance enhancements and reporting obligations during the term of a resolution.
• The Directive calls for incentives for whistleblowers to come forward with information, including participants in misconduct, while preserving the Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) for companies. Effective internal reporting channels and prompt assessment of credible complaints remain important to detecting misconduct and evaluating disclosure options.

Background

The Fraud Division’s creation was announced on January 8, 2026, to “combat the rampant and pervasive problem of fraud.” The White House’s announcement said this new division would focus on “fraud targeting Federal government programs, Federally funded benefits, businesses, nonprofits, and private citizens nationwide.”

On April 7, 2026, then-Acting Attorney General Todd Blanche released a memo detailing the formation of the Fraud Division. In this memo, he directed that the Assistant Attorney General for the National Fraud Enforcement Division immediately assume operational control of the Criminal Division’s Tax Section, the Health Care Fraud Unit, and the Market, Government, and Consumer Fraud Unit. (The Tax Section had received the former Tax Division’s criminal enforcement functions in 2025.) Blanche clarified that attorneys from these units would move to the Fraud Division accordingly. He emphasized the importance of the Division’s creation and consolidation of these groups to avoid duplication and draw clear lines between divisions, with a core mission of investigating and prosecuting fraud against taxpayer dollars and taxpayer-funded programs.

In August 2026, AAG McDonald outlined the five areas of fraud the new Division would focus on: 1) Public trust and financial integrity, 2) health care, 3) internal revenue, 4) global trade and commerce, which includes tariff evasion, forced labor in supply chains, and undervaluation or country-of-origin schemes, and 5) corporate misconduct.

A final rule, effective August 24, formalized the Fraud Division’s authority under 91 FR 53357, establishing a broad range of case categories that the Fraud Division would cover. This includes criminal proceedings involving criminal fraud, except specified antitrust matters. The rule further preserves the Criminal Division’s general criminal-fraud authority while excluding tax fraud and health-plan fraud assigned to the Fraud Division. The two Divisions therefore retain overlapping authority over general criminal fraud, and the new Fraud Division does not replace all other DOJ fraud-enforcement functions. On August 24, the DOJ also announced the launch of a National Fraud Detection Center (NFDC) to help generate more criminal leads.

Corporate Enforcement Under Directive 26-12

Scope and CES Participation

The Directive is addressed to Fraud Division personnel, and expressly excludes cases assigned to a District Fraud Counsel by a US Attorney’s Office that are not also supervised by the Fraud Division. CES may assist US Attorney’s Offices where helpful, but its mandatory involvement under this Directive does not extend to every US Attorney’s Office (USAO) fraud matter.

The new Directive clarifies the CES’s function by directing Fraud Division prosecutors to work closely with the CES at all phases of corporate investigations, from case intake through completion of any corporate resolution or litigation. Its role includes counseling, litigating, and negotiating. The Directive requires prosecutors to report ongoing corporate investigations to the CES and promptly notify CES of new investigations and major developments in ongoing cases.

The directive also places “primary responsibility” with the CES for evaluating a company’s compliance with the terms of corporate criminal resolutions, specifically in evaluating a company’s efforts to implement or enhance its compliance program, ensuring adequate reporting under any disclosure obligations, and responding to any other issues that arise under agreements made. The primary function of these requirements is to “free up resources in the prosecuting sections” to pursue more cases, while allowing enforcement experts to handle compliance with DOJ policies.

Investigative Priorities and Charging Considerations

Building on the Division’s previously announced priorities, the Directive instructs Fraud Division prosecutors to prioritize four kinds of fraud schemes in corporate investigations: health care, including controlled-substance distribution and Federal Food, Drug, and Cosmetic Act violations; public trust or financial integrity related to procurement, government contracts, and other government functions; significant tax evasion; and tariff evasion, importation of goods or services, or forced labor.

The directive instructs prosecutors to place “great weight” on 10 factors in determining whether to bring charges and negotiating plea agreements:

1. Knowledge of or involvement by corporate management in the fraud scheme,
2. Efforts to conceal fraud from government agencies or auditors or otherwise impede or obstruct a government function or oversight,
3. Conduct furthering the scheme over three or more years,
4. Actions that threaten Americans’ safety or security, including military readiness,
5. Conduct causing substantial financial hardship to a taxpayer-funded program or government function,
6. Conduct affecting multiple taxpayer-funded programs or government functions,
7. Conduct affecting three or more federal districts,
8. Conduct causing financial harm to 25 or more victims or causing $25 million or more in loss,
9. Conduct involving exfiltration of American dollars to support international adversaries, and
10. Conduct involving immigration offenses.

The memo confirms that the Fraud Division will still follow the Principles of Federal Prosecution of Business Organizations and the Department-wide Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP). The 10 factors supplement that existing framework and are nonexclusive. Prosecutors may consider other relevant factors consistent with the Justice Manual. No one factor is automatically determinative of a particular outcome, and the Directive cautions against overbroad corporate enforcement that interferes with legitimate business operations.

Disclosure of Misconduct

The directive concludes by instructing Fraud Division leadership to design and implement policies and programs that “appropriately incentivize” whistleblowers to bring forward credible information relating to fraud, including disclosures by individuals who participated in the misconduct. In the follow-on Directive 26-13, issued on October 7, 2026, AAG McDonald confirmed that prosecutors will consider, among other factors, whether a cooperator disclosed previously unknown criminal activity and whether the cooperation materially advanced an investigation, the seizure of criminal proceeds, or resulted in the conviction of others.