Reports suggest that the US IRS has offered advanced training to Ukrainian law enforcement agencies to detect illegal cryptocurrency transactions by Russian oligarchs and companies. Many experts argue that Russia could use digital assets to evade restrictions imposed by the Western World after the military conflict in Ukraine or finance war-related activities. As per the Wall Street Journal, the US Internal Revenue Service (IRS) provided Ukraine with licenses to use Chinalysis Reactor, an investigation software that connects cryptocurrency transactions to real-world entities to trace illicit proceeds by Russians. Ukrainian investigators have also received in-person training from the American department. Eduard Fedorov, Acting Director of Ukraine’s Economic Security Bureau, said, “We resist the aggressor state not only on the battlefield but also on the economic front.”
The goal for Ukrainian agencies is to halt Russian fundraising campaigns related to cryptocurrencies. Yurii Vykhodets, who leads the cyber department of Ukraine’s National Police, said, “One key area is the identification and elimination of centers of support for occupation forces that raise funds for the purchase of things necessary for the war. We often see fundraising campaigns conducted with the use of cryptocurrency, as Russia believes in the possibility of circumventing sanctions by using virtual assets.”
Russia’s invasion of Ukraine resulted in severe sanctions against the world’s largest country by landmass. The USA, the European Union, Australia, and many others have imposed crippling financial restrictions in a bid to cease the aggression and dwindle Russia’s military strength. Many agencies and prominent figures have warned cryptocurrency companies to cut all ties with the invader, arguing that sanctioned oligarchs and organizations could use digital currencies to bypass penalties or fund war-related operations. All of the five cryptocurrency addresses added to the sanctions blacklist by the United States Treasury Department last year were connected to Task Force Rusich, a “neo-Nazi paramilitary group” that has been in combat and has committed brutal crimes on Ukrainian territory.
