Cryptocurrency Fraud , Fraud Management & Cybercrime , Fraud Risk Management

IRS Sharpens Cryptocurrency Investigation Skills

The Internal Revenue Service is sharpening its expertise in cryptocurrencies to help prevent their use for tax evasion and money laundering, says Jarod Koopman, director of the IRS Criminal Investigation Division.

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That has come, in part, by partnering with companies that have developed techniques and technologies for tracing blockchain transactions, he says. Meanwhile, the agency's expertise in cryptocurrency is being tapped by other federal agencies for investigations ranging from terrorism to darknet markets to North Korean hacking.

Koopman says the expertise of the IRS was demonstrated with the recent arrest of the alleged administrator of Bitcoin Fog, a long-running "mixer" service that aims to obfuscate bitcoin transactions and holdings.

"Those types of cases really highlight the level of effort that CI [Criminal Investigation] agents go to in order to really get a hold on those types of transactions," Koopman says. "There's a tremendous amount of work that goes into that."

In this video interview with Information Security Media Group, Koopman discusses:

• How criminals are using cryptocurrency for tax evasion and money laundering;
• Challenges around investigating cryptocurrencies that do not have public blockchains, also known as "privacy coins";
• Why the IRS is looking at deep natural language processing, artificial intelligence and machine learning to tap into unstructured data sources.

Koopman is director of the IRS Criminal Investigation Division in Washington. He has spent nearly 20 years at the IRS, including serving as assistant special agent in charge and special agent in charge in the Chicago and Detroit field offices.