The US Internal Revenue Service (IRS) is intensifying its efforts to identify and apprehend individuals evading international sanctions using cryptocurrencies. The IRS is working closely with Ukrainian investigators and blockchain analytics firm Chainalysis to trace Russian assets concealed through cryptocurrencies following Russia’s invasion of Ukraine.
Enhanced collaboration and tools for Ukrainian law enforcement
The IRS Criminal Investigation Division sponsors Ukrainian investigators’ access to a Chainalysis tool that aids in cryptocurrency probes. The agency has also provided virtual and in-person training sessions on tracing blockchain transactions to Ukrainian law enforcement.
“Sharing tools safeguard the US financial system and the global economy,” IRS Criminal Investigation Chief Jim Lee said in a statement. The partnership is expected to improve information-sharing and case development between the US and Ukraine. Regulators, central bankers, and policymakers have warned that countries like Russia and Iran may use crypto to evade international sanctions.
Binance, the world’s largest crypto exchange, is under investigation by the US authorities over allegations of facilitating illegal access to its platform by Russian individuals. In 2022, the IRS criminal unit seized around $7 billion worth of cryptocurrency.
Investigating and disrupting crypto-based sanctions evasion
Chainalysis has previously partnered with US agencies in several high-profile cases, including the seizure of over $1 billion in Bitcoin from the notorious Silk Road darknet market. Its investors include Singapore’s GIC sovereign wealth fund, Bank of New York Mellon, and Blackstone.
Since Russia invaded Ukraine, cryptocurrencies have been used to fuel war efforts, evade sanctions, and support humanitarian initiatives. US lawmakers are concerned that Russian oligarchs might exploit crypto to circumvent US and European economic sanctions.
IRS-CI is responsible for financial crime investigations, including tax fraud. The division currently has 23 ongoing sanctions-related investigations. Recently, the IRS filed claims worth nearly $44 billion against the estate of bankrupt crypto exchange FTX and its affiliated entities. The US Department of Justice is also investigating whether Binance allowed Russian customers to access the exchange in violation of US sanctions related to Russia’s invasion of Ukraine.
The collaboration between the IRS, Chainalysis, and Ukrainian investigators illustrates a concerted effort to disrupt the use of cryptocurrencies to evade international sanctions. As Ethereum developers and other experts in the blockchain industry continue to innovate, law enforcement agencies worldwide will need to adapt and collaborate to ensure the security and stability of the global financial system.