A new U.S. Internal Revenue Service report was released on Thursday. It highlighted that the IRS seized more cryptocurrency assets worth $3.5 billion in 2020 as part of their tax enforcement remit.

IRS operates a Cyber Crimes Unit, which has been around for several years. This unit focuses on web-based technology that allows criminals to carry out illegal activity without the need of a physical address and in a level 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.

These are some of the key successes in cyber-related areas that were highlighted by the Enforcement Report:

• Seizure of $1 billion in cryptocurrency with the November 2020 takedown of darknet criminal marketplace – Silk Road and its founder
• The dark web’s longest-running money laundering operation was stopped by the mastermind.
• A former employee of Microsoft (NASDAQ) was convicted for swindling millions in Microsoft gift cards codes and laundering those funds via cryptocurrencies

In the CCU section, the IRS Enforcement Team explains its increased focus on priority training and the deployment cryptocurrency, blockchain and open source intelligence technologies (OSINT). This is to help unravel complicated financial scams. As the cyber-payment landscape changes, they plan to expand their commitment to cyber-crimes and crypto-crime.

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.

To The Flipside

• Because crypto regulations remain in uncertainty, IRS enforcement must rely upon existing statutes that may or not be applicable to each cryptocurrency application. Some convictions will be overturned or appealed.

Why you should care

While the IRS’s crypto-enforcement agents may be initially focused on criminal activity they will eventually turn their attention towards everyday retail investors just like you. You must comply with tax reporting requirements and records-keeping regulations in your area.

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