“IRS collaborates with Ukraine to trace hidden assets of Russian oligarchs using cryptocurrencies”

IRS provides assistance to Ukraine for tracking Russian oligarchs’ hidden assets in crypto exchanges

The Internal Revenue Service Criminal Investigative Division (IRS-CI) of the United States has donated 15 licenses of the Chainalysis Reactor platform to a team of Ukrainian investigators this week, as part of a larger effort to unravel the financial networks that Russian oligarchs use to evade international sanctions. Specifically, the platform will help track the Russian oligarchs’ assets hidden in the various crypto exchanges in Ukraine.

Focus on increasing professionalism of Ukraine’s Economic Security Bureau’s

The Economic Security Bureau of Ukraine will use Chainalysis Reactor to identify and track down all Russian assets within its borders. The training attendees include 20 Ukrainian investigators who will participate in a week of advanced trainings led by personnel from both IRS-CI and Chainalysis. This collaboration is an example of how international experience in conducting investigations using digital data and algorithms can contribute to increase the professionalism of its employees.

Challenge posed by cryptocurrencies

According to Eduard Fedorov, acting director of the Economic Security Bureau of Ukraine: “Cryptocurrencies are playing an unprecedented role in Ukraine in both good ways and bad, from the facilitation of donations to ransomware attacks and sanction evasion”. As such, Ukraine is committed to resisting aggression on their economic front, apart from the battlefield. The Licenses will allow authorities to trace the source of blockchain funds and unmask cryptocurrency transactions using cryptocurrency forensic tools.

Shift in focus to money laundering networks

The 15 licenses donated by the IRS come as the U.S. government’s Task Force KleptoCapture is carrying out 23 ongoing sanctions-related investigations, with a focus on tracking down the oligarchs’ money laundering networks. This represents a shift in focus from the previous strategy of seizing assets such as private jets and yachts. As noted by Andrew Adams, the Head of the Task Force KleptoCapture, “facilitation networks, procurement networks, money-laundering networks,” have become the primary focus. As of April 30, under the task force’s authorities, the U.S. government had seized $500 million in assets.

Recommendation

With the growing use of cryptocurrencies and blockchain technology, it is increasingly important that regulatory agencies and law enforcement agencies collaborate internationally. This is particularly urgent with the challenge of tracing hidden assets and financial networks of sanctioned persons. Governments and law enforcement agencies therefore need to continually upgrade their skills, expertise, and tools to keep pace with the rapid evolution of cryptocurrencies, money laundering, and financial criminality. It is vital that countries and regulatory agencies work together more closely to keep criminals from taking advantage of the loopholes in regulatory frameworks.

Author: undefined
Publication: The New York Times
Date: May 12, 2023