The IRS’ Criminal Investigation (CI) has been asked to provide expertise and intelligence in order to assist efforts to enforce sanctions on Russia. The IRS will be working alongside other law enforcement agencies in order to investigate cybercriminals, Russian oligarchs and those who facilitate illegal movement of money/assets on their behalf.
“CI has been called on to dedicate resources to the Kleptocapture task force convened to hold Russian oligarchs accountable for potential schemes to evade sanctions or launder money. These efforts fit in to CI’s broader objectives of persecuting wealthy tax evaders and financial criminals who deploy sophisticated techniques to reap billions in illicit gains each year,” the IRS report said.
The IRS has significant experience in unearthing money laundering by oligarchs. By following money and asset trails, CI Special Agents working along with other law enforcement agencies trace illegal transactions and seize the illicit money and properties. The IRS has also built a world-class cybercrimes program that looks into cybercrimes involving taxes, and financial and economic systems. In 2021 alone, it seized over $3.5 billion in illegal cryptocurrency, and has already seized more than that this year.
IRS-CI Successes with Tax Evasion and Cyber Crimes
With a budget of just over $600 million, the IRS-CI identified $10.4 billion in tax fraud and financial crimes last year. Even when they have been under-funded for several years, they have prevented and exposed criminal activities on a large scale. In 2013, CI agents investigated a Russian oligarch named Oleg Tinkov who understated his wealth to the IRS on his tax returns in order to avoid exit taxes. He was indicted in 2019 for filing false tax returns and arrested in 2020. He paid in restitution to the U.S. Treasury more than double the amount he wished to escape with.
“CI cyber agents have also previously been engaged in the review and investigative efforts involving cryptocurrency transactions associated with Russian-based entities for the past several months. The project, known as Sanction Evaders, is looking at blockchain transactional information associated with sanctioned countries,” the report said.
Another big success of the CI came in 2020 when the CI agents seized about $1 billion of Bitcoins after the prosecution of Silk Road creator Ross Ulbricht. Using blockchain analysis tools and third-party tools, the CI agents traced the money trail and recovered the illicit gains. In 2021, the CI agents seized $3.6 billion of stolen cryptocurrency and continue their efforts to investigate crypto currency and cybercrimes.
New Challenges and Funding
With the new challenges the IRS faces due to increase in financial crimes related to cryptocurrency and the additional work load owing to the sanctions on Russia, the CI needs to be adequately funded to fulfill its new responsibilities and has asked the Congress for $5 billion to fund 40% increase in workforce over the next five years.
The workforce of the CI has shrunk by 25% over the last 10 years, mirroring the reduced workforce across the IRS. This has hindered the IRS from enforcing the law and improve compliance. For a special force such as the CI that needs to work across the global financial landscape to trace money exchanges and seize assets, inadequate funds and workforce directly impacts results.
Even with the tax season on, which puts unprecedented burden on the resources of the agency, the IRS has been given another important task of investigating Russian oligarchs. Since 2017, the IRS has conducted over 20 investigations related to illicit money laundering by oligarchs. IRS-CI has the expertise in investigating financial crimes such as money laundering, currency violations, financing of terrorists, and cybercrimes, which makes them a vital force in enforcing sanctions on Russia.