IRS, Chainalysis Helping Ukraine Track Russians Using Crypto to Evade Sanctions

The U.S. Internal Revenue Service (IRS) said it’s working closely with Ukraine to help it trace crypto transactions of Russian sanctions evaders. The agency is providing the Ukrainians access to a Chainalysis tool as well as specialized training to Ukrainian law enforcement.

The criminal investigation division of the United States Internal Revenue Service announced it’s stepping up collaboration with counterparts abroad as part of efforts to identify persons and entities evading Western sanctions.

The agency revealed it’s working with blockchain forensics firm Chainalysis and Ukrainian investigators to track Russians who might be using cryptocurrencies to conceal their assets amid financial restrictions imposed over Moscow’s invasion of Ukraine.

According to a report by Bloomberg, the IRS is sponsoring Ukraine’s access to a Chainalysis tool facilitating crypto-related probes. It has also organized training sessions for the country’s law enforcement, both virtual and in-person, on tracing blockchain transactions.

These efforts are expected to improve information-sharing and case development between the U.S. and Ukraine, the revenue service explained in a statement. Commenting on the cooperation, IRS Criminal Investigation Chief Jim Lee emphasized:

Sharing tools not only safeguards the U.S. financial system, but the global economy.

Authorities around the world have issued warnings that sanctioned countries like the Russian Federation and Iran may be using crypto to bypass international restrictions. Another Bloomberg report recently revealed that the world’s largest crypto exchange, Binance, is facing an investigation by the U.S. Justice Department over suspected violations of Russia sanctions.

According to Michael Gronager, co-founder and chief executive of Chainalysis, crypto is still too illiquid to support mass sanctions evasion but this does happen on a smaller scale. Work to establish how much Russian oligarch money is flowing through Ukraine is continuing, he added.

Gronager also noted that cryptocurrency is playing an unprecedented role in the war through donations in support of both sides. Around $5 million have been transferred this way to approximately 100 pro-Russia groups over the past year, he pointed out as an example. Most crypto assets sent from wallets sponsoring Russia reach centralized exchanges, research showed in March.

Ukraine and the United States have been working together on other crypto-related fronts. Supported by U.S. law enforcement, Ukrainian police disrupted a network of crypto exchange services suspected of laundering criminal proceeds from ransomware attacks and fraud schemes, announcing the shutdown of 9 of such platforms earlier in May.

Do you think the U.S. and Ukraine will further expand their cooperation on tracking Russian crypto transactions? Tell us in the comments section below.