The IRS Criminal Investigation Division is intensifying its collaboration with overseas counterparts, particularly Ukrainian investigators, to target Russian individuals who may be using cryptocurrencies to conceal their assets in the wake of Russia’s invasion of Ukraine. The agency is working closely with Chainalysis, a leading blockchain analytics firm, to provide specialized tools and training to Ukrainian law enforcement in tracing blockchain transactions.
Boosting international cooperation with Blockchain analysis
IRS Criminal Investigation Chief Jim Lee stated that sharing tools with their Ukrainian counterparts is crucial to safeguard the global economy and the US financial system. To this end, the IRS is sponsoring Ukrainian investigators’ access to a Chainalysis tool designed to aid in crypto-related probes. Additionally, the agency has offered virtual and in-person training sessions on tracing blockchain transactions to Ukrainian law enforcement.
Recent years have seen an increased focus on cryptocurrencies by IRS criminal investigators, as digital assets are believed to be susceptible to financial frauds such as money laundering, market manipulation, and tax evasion. The IRS has been involved in several large-scale digital asset seizures, including the record recovery of $3.6 billion worth of Bitcoin stolen during the 2016 hack of the crypto exchange Bitfinex. Currently, the IRS criminal unit is engaged in 23 ongoing sanctions-related investigations.
Countering the cryptocurrency threat in the wake of Russian sanctions
Countries like Russia and Iran have been flagged by regulators, central bankers, and policymakers for potentially using cryptocurrencies to evade international sanctions. For example, Binance, the world’s largest crypto exchange, is under investigation by the US for allegedly allowing Russians to illegally access its platform.
The IRS has worked diligently to combat this threat, providing blockchain analysis tools and expertise to government and private sector clients. Chainalysis, which has partnered with the IRS in various cases, including the seizure of more than $1 billion in Bitcoin stolen from the infamous Silk Road darknet market, raised $170 million in a Series F financing round last year, backed by Singapore’s GIC sovereign wealth fund, Bank of New York Mellon, and Blackstone.
Ukrainian law enforcement has also proactively addressed the risks posed by cryptocurrencies, with support from US law enforcement. In May, Ukrainian police disrupted a network of crypto exchange services suspected of laundering criminal proceeds from ransomware attacks and fraud schemes, shutting down nine such platforms.
