Blockchain analysis has played a crucial role in the United States Internal Revenue Service’s (IRS) seizure of approximately $10 billion worth of cryptocurrency, which was acquired through investigating an extensive range of criminal activities dealing with digital assets.
During an exclusive interview with Cointelegraph in Amsterdam, Jim Lee, Chief of IRS Criminal Investigations (IRS-CI), discussed this important point. At Chainalysis’ Links conference held in the Netherlands, Lee and a group from IRS-CI provided an insight into how the agency approached the use of cryptocurrency and digital assets in various financial crimes.
Lee, who has been a special agent for the IRS for 28 years and leading the unit since 2020, explained that the agency’s efforts to investigate crimes involving digital money became more reliant on the tools developed by private institutions.
Chainalysis, established in 2014, has developed an array of blockchain analysis tools, and its suite is used by the IRS-CI and several other government organizations and law enforcement agencies worldwide, which makes tracing cryptocurrency and manipulating data from public blockchains to darknet marketplaces easier.
The IRS partnership with Chainalysis has become increasingly essential, and Lee stressed that the unit’s efforts to investigate crimes related to crypto would be close to “impossible” without the infrastructure and tools. While the market value of cryptocurrency seized in the IRS’ vaults has decreased, the department still needs to ensure that it safely manages billions of dollars in digital assets.
Investing in people, data, and technology has been instrumental in the IRS’ fight against crypto-related crimes, according to Lee, who also mentioned that the agency had become the most significant contributor to the US Treasury asset forfeiture fund in recent years.
Another critical responsibility of the IRS CI is to educate and empower local and international law enforcement agencies to use tools like Chainalysis Reactor in financial crime investigations. During his visit to Europe in May 2023, Lee facilitated the training of over 60 officials from various Ukrainian law enforcement agencies. The IRS-CI also donated Chainalysis Reactor licenses to Ukrainian law enforcement, which would aid in blockchain and cryptocurrency tracing amid the ongoing Russian-Ukrainian conflict.
