Billions in stolen crypto. Oligarchs' illicit assets. Financial crime is more complex than ever — and investigators say they need help to keep up
In its more than 100-year history, the IRS criminal investigation unit has helped put away the likes of Al Capone and John Gotti. It is the nation's sixth-largest federal law enforcement agency and the only one authorized to investigate federal criminal tax violations and pursue related financial crimes, such as money laundering, currency violations and terrorist financing.
But as the financial world grows more complex, so has criminal activity – and the unit tasked with bringing such illicit action to heel is facing an increasing challenge. About 75% of the unit's time is spent on tax investigations, but in recent years, they've shifted resources to emerging areas – like cryptocurrency.
"Gone are the simple days of a person sending a transaction through a single bank account. That was easy to uncover: gain records from the bank. Now it's a very complicated web of sophisticated criminals trying to move money globally," said Jarod Koopman from the IRS criminal investigation unit.
Last fiscal year, the criminal investigation unit identified $3.5 billion in stolen crypto. This year, they've already exceeded that amount. And the crypto team, once 10 people, is now 70. But that's not because of an expanded workforce. Instead, IRS officials said, the agency has pulled resources away from other priorities.
Hunting down oligarchs' assets
As the United States and allies slapped sanctions on Russian banks, officials, businesses, oligarchs and their families in an effort to inflict financial pain on Russia for its invasion of Ukraine, the Internal Revenue Service is also at the forefront of making sure the wealthiest Russians helping fuel Russian President Vladimir Putin's war machine are not evading restrictions.
In early March, the Justice Department launched the Kleptocapture Task Force to enforce sanctions and export restrictions imposed by the United States against Russia. The IRS criminal investigation unit is part of that interagency effort to find and seize yachts, houses, luxury vehicles and more.
But their work began long before the recent invasion. Since 2017, the IRS has been involved in similar sanctions evasion work, with roughly 20 investigations directly related to money laundering by oligarchs. Criminal investigation unit cyber agents have also been working on efforts involving cryptocurrency transactions associated with Russian-based entities for the past several months.
Some of the ways targets have tried to evade sanctions and continue living their lavish lifestyles include using other names, establishing fictitious businesses and using new platforms like digital assets and cryptocurrency to shift funds, IRS officials said. IRS investigators look at both traditional and nontraditional financial transactions as individuals try and move billions of dollars globally, which compliments the task force's work.
"Our job has been really to take a look at the financial transactions and those flows that occur to understand and unravel the web that those criminals are trying to mask," said Koopman.
As part of the supplemental package for support for Ukraine, the Treasury Department requested Congress include $30 million for the criminal investigation unit to help with some of its work focused on sanction evasion by Russian oligarchs. The IRS uses a database that tracks public records across the world to help learn how different people are holding assets. The unit has five subscriptions to the service; the additional funding would expand that to 60 subscriptions allowing more people to access the information, IRS officials said.
That funding request was denied.
A cat and mouse game
Officials warn that without more resources, not only are they unable to stop illegal activity, they are unable to serve as a deterrent – which could lead to an increase in illegal activity just as the use of crypto and other digital assets are on the rise.
In just over a decade, the unit has lost approximately 25% of its employees. Today, it has fewer than 3,000 employees, even as the industry grows more complex. The Treasury Department has called for the unit to grow by more than 40% over the next five years to meet its increasing needs, from carrying out investigations to scoping out emerging areas.
"When you think of the deterrence effects of having a meaningful CI presence that's able to investigate some of these really sophisticated financial criminals, this is clearly an area of substantial need," said Natasha Sarin at the Treasury Department.
The depleted criminal investigation unit is part of a broader lack of resources and staffing at the IRS. The agency overall has seen its budget drop by 20% over the past ten years. Efforts to increase funding for the agency have been met with fierce political resistance.
There has been some progress for the Biden administration: The omnibus spending package passed earlier this month included the largest increase of the agency's budget in two decades – a 10% raise. But a push for another $80 billion for the agency has hit a wall.
The criminal investigations unit identified $10.4 billion from tax fraud and financial crimes last year. The Treasury Department said it likely deterred the equivalent amount of such behavior, all with a budget of just $600 million.
IRS officials said they've been able to adjust by using technology to their advantage to become more efficient, but with more criminals – it means a need for more resources.
As IRS officials put it: It's a cat and mouse game.