The United States Internal Revenue Service’s (IRS) criminal investigation division is intensifying its collaboration with foreign counterparts to identify individuals and entities evading Western sanctions. The agency is working with blockchain forensics firm Chainalysis and Ukrainian investigators to track Russians who may be using cryptocurrencies to conceal their assets amid financial restrictions imposed over Moscow’s invasion of Ukraine.
IRS Sponsors Ukraine’s Access to Chainalysis Tool
The IRS is sponsoring Ukraine’s access to a Chainalysis tool that facilitates cryptocurrency-related probes. It has also organized virtual and in-person training sessions for the country’s law enforcement on tracing blockchain transactions. These efforts are expected to improve information-sharing and case development between the US and Ukraine. According to the IRS Criminal Investigation Chief, Jim Lee, “sharing tools not only safeguards the US financial system but the global economy”.
Concerns Over Sanctioned Countries Using Crypto to Bypass Restrictions
Authorities worldwide have warned that sanctioned countries like Russia and Iran may use crypto to bypass international restrictions. A recent report by Bloomberg revealed that Binance, the world’s largest crypto exchange, faces an investigation by the US Justice Department over suspected violations of Russia sanctions.
According to Chainalysis co-founder and CEO, Michael Gronager, cryptocurrency is still too illiquid to support mass sanctions evasion, but it happens on a smaller scale. He added that work to establish how much Russian oligarch money is flowing through Ukraine is continuing. Gronager also noted that crypto is playing an unprecedented role in the war through donations supporting both sides. Approximately $5 million has been transferred this way to about 100 pro-Russia groups over the past year.
Ukraine and the US have been working together on other crypto-related fronts. Supported by US law enforcement, Ukrainian police disrupted a network of crypto exchange services suspected of laundering criminal proceeds from ransomware attacks and fraud schemes, announcing the shutdown of nine such platforms earlier in May.