The IRS criminal investigation division is ramping up collaboration with counterparts overseas in pursuit of sanctions evaders. The agency said it is working with blockchain analytics firm Chainalysis and with Ukrainian investigators to track Russian individuals who might be using cryptocurrency to conceal their assets in the aftermath of Russia’s invasion of Ukraine.
(Bloomberg) — The IRS criminal investigation division is ramping up collaboration with counterparts overseas in pursuit of sanctions evaders. The agency said it is working with blockchain analytics firm Chainalysis and with Ukrainian investigators to track Russian individuals who might be using cryptocurrency to conceal their assets in the aftermath of Russia’s invasion of Ukraine.
The agency is sponsoring Ukrainian investigators’ access to a Chainalysis tool that aides crypto probes. It has also offered both virtual and in-person training sessions on tracing blockchain transactions to Ukrainian law enforcement.
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“Sharing tools not only safeguards the US financial system, but the global economy,” IRS Criminal Investigation Chief Jim Lee said in a statement. The efforts are expected to improve information-sharing and case development between the US and Ukraine, the IRS said.
Regulators, central bankers and policy makers have warned that countries including Russia and Iran may be using crypto to evade international sanctions. Binance, the world’s largest crypto exchange, is facing a US probe over whether it allowed Russians to illegally access its platform. Last April, the US Treasury Department imposed sanctions on a Switzerland-based Bitcoin miner called BitRiver, accusing it of helping Russia “monetize its natural resources.”
- Read: Binance Faces US Probe of Possible Russian Sanctions Violations
Crypto is still too illiquid to support mass Russian sanctions evasion but it does happen on a smaller scale, Michael Gronager, co-founder and chief executive officer of Chainalysis, said on a call Thursday with reporters. It’s difficult to estimate precisely how much Russian oligarch money is flowing through Ukraine because work to identify those transactions is continuing, he said.
Gronager added that crypto is playing an “unprecedented role” in the war through donations — both in support of Ukraine and in support of Russia. Over the last year, about $5 million in donations have been funneled to approximately 100 different pro-Russia groups, but the pace of giving is beginning to slow as blockchain analysis tools are used to trace and curb some of those transactions, he said.
In recent years, IRS criminal investigators have increased their focus on crypto, saying it’s ripe for financial frauds such as money laundering, market manipulation and tax evasion. The agency has also been involved in several of the largest recent digital-asset seizures, including the record recovery of $3.6 billion worth of Bitcoin stolen during the 2016 hack of crypto exchange Bitfinex. The unit seized around $7 billion worth of crypto in 2022, according to comments from Lee last year. The IRS criminal investigation division said it currently has 23 ongoing sanctions-related probes.
The agency plans to soon open a data center in Northern Virginia, known as a the Advanced Collaboration and Data Center, which will devote more resources toward fighting cyber and crypto-related crimes, Lee said on the call with reporters.
Chainalysis, which sells blockchain analysis tools, expertise and data to clients in both government and the private sector, has worked with US agencies on a number of cases including the seizure of more than $1 billion in Bitcoin stolen from the infamous Silk Road darknet market. Its backers include Singapore’s GIC sovereign wealth fund, Bank of New York Mellon and Blackstone, the company said in a blog post announcing a $170 million Series F financing last year.
(Adds comments from Chainalysis executive, IRS official beginning in fifth paragraph.)
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