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Multinational J5 crypto tax fraud, money laundering team created

Posted: 5 July 2018 6:05 pm
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As in, an anti crypto tax fraud and money laundering team

In an effort to crackdown on international money laundering, tax evasion and organised cybercrime, the US Internal Revenue Service (IRS) has spearheaded the creation of a multinational agency to address the problem.

Called "J5," the coalition includes government agencies from Australia, Canada, the Netherlands, the United Kingdom and the USA.



The size of the problem

It's pretty big.

By current estimates, only about 1% of moving criminal assets is seized each year, while the procedures required to seize them are costing different stakeholders countless billions. Of that, only about 5% is estimated to be going through cryptocurrencies though. This might be because cryptocurrency is still at the point where it generally has to be converted back into fiat to actually use it, and these conversions are just one more point of risk that experienced money launderers would prefer to do without.

This point of failure is one of the risks that undid the "Cobalt" hackers. Their digital bank robberies stole Euros, which they then converted to cryptocurrency which was used to make direct purchases all over the world. This switch was necessary to convert large amounts of stolen cash to cars, houses and everything else, without at any point providing any form of identification. In their case, they used the millions in cash to anonymously buy thousands of prepaid gift cards, and then sent dozens of mules all over Europe to very slowly and gradually buy cryptocurrency from brokers in amounts small enough to not require ID. Only now could they quickly move large amounts of money internationally, in the form of crypto, and have it be spendable on the other end of the line.

The ringleader's arrest in Spain highlighted the international scope of the Cobalt operation and may have been one of the success stories that spurred the creation of J5.

"This global operation is a significant success for international police cooperation against a top level cybercriminal organisation," said Steven Wilson, head of Europol's European Cybercrime Centre of the Cobalt operation. "The arrest of the key figure in this crime group illustrates that cybercriminals can no longer hide behind perceived international anonymity. This is another example where the close cooperation between law enforcement agencies on a worldwide scale and trusted private sector partners is having a major impact on top level cyber criminality."

The shape of the solution

The shape of the solution to better re-create success stories like Cobalt is through international cooperation.

"We cannot continue to operate in the same ways we have in the past, siloing our information from the rest of the world while organised criminals and tax cheats manipulate the system and exploit vulnerabilities for their personal gain," said Don Fort, chief of IRS-CI. "The J5 aims to break down those walls, build upon individual best practices, and become an operational group that is forward-thinking and can pressurize the global criminal community in ways we could not achieve on our own."

The J5 is composed of the Australian Criminal Intelligence Commission (ACIC) and the Australian Tax Office (ATO), the Canada Revenue Agency (CRA), the Fiscale Inlichtingen- en Opsporingsdienst (FIOD), HM Revenue & Customs (HMRC), and Internal Revenue Service Criminal Investigation (IRS-CI).

As well as working to build a foundation for international cooperation against the increasingly global nature of cybercrime, with an emphasis on tax evasion, another stated goal of the J5 is to "collaborate internationally to reduce the growing threat to tax administrations posed by cryptocurrencies and cybercrime and to make the most of data and technology."

Whether making the most of data and technology means encouraging privacy cryptocurrencies so people can protect themselves from criminals or cracking down on them instead remains to be seen. But signs point to the latter.


Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and XRB.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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