In a new report from the U.S. Internal Revenue Service (IRS) issued on Thursday, the tax collection agency highlighted in the 49-page document that in 2020 it seized more than $3.5 billion worth of cryptocurrencies, which accounted for 93% of seized assets as part of its tax enforcement remit.
The IRS has a dedicated Cyber Crimes Unit (CCU) that has been operating for a few years, and focuses on internet-based technologies that enable criminals to engage in illegal activities without a single physical location, and with a degree of pseudonymity.
According to the report, the bulk of the crimes that the CCU pursues almost always involve the use of cryptocurrencies to facilitate the criminal activity it fights which include: tax fraud, drug trafficking, money laundering, and wire fraud – comprising most of the $3.5 billion confiscated last year.
Key cyber-related successes featured in the enforcement report include:
- Seizure of $1 billion in cryptocurrency with the November 2020 takedown of darknet criminal marketplace – Silk Road and its founder
- The arrest of the mastermind of the longest-running money laundering operation on the dark web
- The conviction of a former Microsoft employee for scamming millions in Microsoft gift card codes and laundering those funds through cryptocurrencies
Under the CCU section of the report, the IRS enforcement team outlines its increasing attention on prioritized training and the deployment of cryptocurrency, blockchain, and open-source intelligence technologies (OSINT) to unravel complex financial scams. And they intend to increase that commitment to pursue crypto- and cybercrimes as the digital payment landscape continues to evolve in the future.
To keep pace and prepare for that eventuality, the IRS CCU has announced its plans to launch an Advanced Collaboration & Data Center (ACDC) in the Northern Virginia area next year. The focus of that center will be to unify data, technology, and specialized personnel from across the Treasury and government to work on high-impact solutions to “…protect the integrity of the U.S. tax and financial systems.”
The agency leadership goes on to state in the report that it believes the integration of the Eastern CCU based in Washington, D.C. and IRS’s Cyber Support Unit will ensure that the soon-to-be-created ACDC will have a clear operational focus and create high-tech solutions to better solve digital crimes.
On The Flipside
- As crypto regulations are still in limbo, IRS enforcement will have to rely on existing statutes which may, or may not, apply to every cryptocurrency application. Some convictions are likely to be appealed or possibly overturned as a result.
Why You Should Care?
IRS crypto-enforcement officials may focus initially on criminal activities, but they will certainly turn their attention on everyday retail investors like us. Be sure to comply with all tax reporting and record-keeping requirements within your geography.