IRS Seized $3.5 Billion in Crypto in 2020, According to New Crime Report

In a new report from the U.S. Internal Revenue Service (IRS) issued last Thursday, the tax collection agency highlighted in the 49-page document that in 2020 it seized more than $3.5 billion worth of cryptocurrencies. That crypto amount accounted for 93% of the total assets seized as part of its tax enforcement remit.

You may not know — because I didn’t — that the IRS has a dedicated Cyber Crimes Unit (CCU) that has been operating for a few years. It focuses on internet-based technologies that enable criminals to engage in illegal activities without a single physical location, and with a degree of pseudonymity — which sounds a lot like some of the attributes of cryptocurrencies.

In fact, according to the report, the bulk of the crimes that the CCU pursues almost always involve the use of crypto to facilitate the criminal activity it fights. This includes crimes like tax fraud, drug trafficking, money laundering, and wire fraud — comprising most of the $3.5 billion confiscated last year.

Key cyber-related successes featured in the enforcement report include:

• Seizure of $1 billion in cryptocurrency with the November 2020 takedown of darknet criminal marketplace Silk Road and its founder.
• The arrest at LAX airport of the mastermind of the longest-running money laundering operation on the dark web.
• The conviction of a former Microsoft employee for scamming millions in Microsoft gift card codes and laundering those funds through cryptocurrencies.

Under the CCU section of the report, the IRS enforcement team outlines its increasing attention on prioritized training and the deployment of cryptocurrency, blockchain, and open-source intelligence technologies (OSINT) to unravel complex financial scams. And they intend to increase that commitment to pursue crypto- and cybercrimes as the digital payment landscape continues to evolve.

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.

It’s a known fact that both cryptocurrencies and fiat monies are used in illegal activities. And it’s good that the IRS is stepping up its enforcement to crack down on crypto criminality. However, let’s not over rotate here and throw out newly born blockchain benefits with the bad guy bathwater. Common sense crypto regulation is necessary to ensure law-abiding investors have access to this asset class while scofflaws do not.