The Organisation for Economic Co-operation and Development (OECD) issued a “call to action” for countries to do more to tackle enablers of tax crimes. The result of this “call to action” was the establishment of an operational alliance known as the “Joint Chiefs of Global Tax Enforcement”, also known as the “J5”, as the members are five leaders of tax enforcement authorities from Australia, Canada, the Netherlands, the United Kingdom and the United States (IRS-Criminal Investigation: IRS-CI).   

The objective of the J5 is increased collaboration in the fight against international and transnational tax crime and money laundering through implementing new approaches via joint efforts and sharing the results with a greater tax enforcement community.  The J5 states that offshore structures and financial instruments, where used for committing tax crimes and money laundering, are detrimental to the economic, fiscal, and social interests of countries.

What will the J5 do?

• work together to investigate those who enable transnational tax crimes and money laundering and those who benefit from it.
• collaborate internationally to reduce the growing threat to tax administrations posed by cryptocurrencies and cybercrime.
• make the most of data and technology.

The J5 will accomplish this by:

• Developing shared strategies to gather information and intelligence that will strengthen operational cooperation in matters of mutual interest, and target those who seek to commit transnational tax crime, cybercrime and launder the proceeds of crime.
• Driving strategies and procedures to conduct joint investigations and disrupt the activity of those who commit transnational tax crime, cybercrime, and those who enable and assist money laundering.
• Collaborating on effective communications that reinforce that J5 is working together to tackle transnational tax crime, cybercrime and money laundering.

Expected Results of the J5 Collaboration

• Enhance existing investigation and intelligence programs
• Identify significant targets for new investigations
• Improve the tactical intelligence threat picture now and into the future
• Lead the wider community in developing its strategic understanding of the methods, weaknesses and risks from offshore tax crime and cybercrime
• Raise international awareness that the J5 is working together to reduce transnational tax crime, cybercrime and money laundering, and create uncertainty for those who seek to commit such offenses.

IRS is on to Crypto

Cryptocurrency transactions are not linked to a specific person through transparent identifiers.  They operate under a secure identifier using a unique string of characters enabling payments to an individual or entity via Blockchain transactions.  Cryptocurrency transactions are called “Pseudo-anonymous” because although a person’s name, physical address, or email cannot be found in the actual transaction, a person’s identity can be “tracked down” using public address info and IPs (Internet Protocol Addresses).    

The IRS Chief of Criminal Investigation, Don Fort, recently stated: “It’s possible to use Bitcoin and other cryptocurrencies in the same fashion as foreign bank accounts to facilitate tax evasion.”  IRS-CI has several investigators that are focusing on international crimes that arise from Taxpayers that are using Cryptocurrency to avoid taxes. After Coinbase, where the IRS was successful in issuing a “John Doe” summons and identifying customers, the IRS concluded that many Cryptocurrency users are not paying taxes.  

Don’t be a Victim of your Own Making

Cryptocurrency transactions are not exempt from Government regulation and reporting.  The IRS is determined to audit the cryptocurrency sector and close out or narrow the Reporting Gap.  IRS has demonstrated its determination via the Coinbase summons, and now through joining the J5.

If you are a Taxpayer with reportable gains, consult with your tax specialist, even if you have not received a Form 1099.  The burden is on the Taxpayer to report voluntarily and pay taxes on gains earned. Taxpayers also ought to implement sound record keeping tracking their capital gains and losses.