IRS Sees Crypto Firms as Potential Partners in Fighting Crime

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Cryptocurrency is here to stay, a senior Internal Revenue Service law enforcement official has said, and the tax agency wants to partner with the industry to fight financial crime.

The IRS’ Criminal Investigations Division recruits hundreds of new officers each year, many of whom will be directed to work on digital assets and cybercrime, said Thomas Fattorusso, the special agent in charge of the IRS field office. IRS-CI in New York.

In the alphabet soup of federal law enforcement agencies, the IRS-CI has not garnered as much attention as its counterparts in the Federal Bureau of Investigation or the Drug Enforcement Administration. But the 102-year-old IRS law enforcement arm, whose officers are sometimes affectionately referred to as armed accountants, is one of America’s top financial crime officials, handling cases ranging from money laundering to Russian sanctions. He also turned to cryptocurrency as one of many federal agencies trying to tackle the burgeoning industry.

Mr. Fattorusso, who spoke to the Wall Street Journals Risk & Compliance Journal, said the IRS-CI, which often competes with the crypto industry for talent, welcomes the revolving door of the mixing talent between government and industry as a way to foster linkages. Responses have been edited for clarity and length.

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WSJ: How do you view digital assets? Are you ready to work with these companies?

Mr. Fattorusso: We cannot be against technology. We have to embrace it.

Cryptocurrency is here to stay, as far as I’m concerned. It’s not going anywhere anytime soon and getting more legit as the years go by, it gets more sophisticated. I think these relationships will develop over the years and [as] businesses become more comfortable dealing with the federal government. I don’t see how we can function in this space without it.

WSJ: Are you getting the level of cooperation and partnership that you would like with cryptocurrency companies?

Mr. Fattorusso: This is something we have always worked towards. I can’t say whether we received that or not, but that’s always the end goal, to have those partnerships and to have a relationship that’s not contentious. Rather a symbiotic relationship.

This helps them in their legitimacy. It’s a new industry for everyone. I think we’re still trying to work our way around that. Companies fumble around this.

WSJ: The digital asset space has some highly technical areas. Do you have the talent you need?

Mr. Fattorusso: We have been very lucky, especially in recent years. We were in the process of recruiting right now, so we were hiring several hundred agents a year and sending them to the academy in the hopes that they would come out and be part of the top financial investigator team.

But many of them have a technical background. They are younger. They grew up in the world of technology. More than me, for example, who didn’t grow up in this world.

It is sometimes difficult to compete with private companies. But there are those who want to dedicate their lives to service, who want to fight fraud, who want to uphold the law.

We have hired CI data scientists very well over the past few years, which is brand new for us.

WSJ: On the topic of competing with the private sector, some federal agencies are known to have a revolving door, where talented people come to work for them and then join the private sector. Does this happen in your agency?

Mr. Fattorusso: We were starting to see that more often now, especially with cyber. Several of our cyber agents and managers have gone to private companies. We find these partnerships beneficial because they understand what we need from a law enforcement perspective to investigate cybercrime. And they can help us in this area. And now we have an open flow or an open dialogue that we didn’t have before because we didn’t have contact there.

They will go into the private sector and then they will come back to government and go back into the private sector. Nothing wrong with that. They gain experience and they bring that experience wherever they go. And if they report it to us in law enforcement or if they help us when they’re on the private side, that only helps us.

If you are aware of what has happened in some of these exchanges, you know that our agents are marketable and are picked up in these various private companies because of the work they do and the knowledge they bring. We hoped to develop these relationships even further. OK, you used to work here with us, maybe you can help us with the investigations.

Write to Richard Vanderford at [email protected]

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