IRS SPOTLIGHTS CRIMINAL INVESTIGATION LAW ENFORCEMENT:

CI pursues financial crimes like money laundering, terrorist financing, cybercrimes, and sanctions evasion—including investigating and seizing assets of Russian elites

IRS Criminal Investigation (CI) serves the American public by investigating potential criminal violations of the Internal Revenue Code and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law. It is the only federal law enforcement agency authorized to investigate federal criminal tax violations and pursues related financial crimes, such as money laundering, currency violations, and terrorist financing. These efforts are increasingly important given emerging threats in the global financial landscape.

• General tax fraud investigations are at the core of CI’s law enforcement efforts—CI has the authority to seize assets that are involved in money laundering or other unlawful activities, and it is the largest law enforcement division of Treasury with this capacity.

• In recent years, CI has significantly expanded its presence in areas of emerging importance. Since 2015, it has built up a world-class cybercrimes program to address the exponential growth of cybercrimes impacting the tax, financial, and economic systems of the U.S. This group successfully seized more than $3.5 billion of illicit cryptocurrency in fiscal year 2021, and they have already seized more than this amount in fiscal year 2022.

• Alongside investigating cybercriminals, CI has recently been called upon to provide its unique expertise to assist with interagency efforts to enforce sanctions related to Russia’s invasion of Ukraine, as called for in the related Kleptocapture Task Force announced by the Department of Justice. Working with law enforcement entities across government, the IRS is already in the process of investigating Russian oligarchs and those who facilitate the illegal movement of money or assets on their behalf.

Given its sizable—and growing—responsibilities, it is important to highlight that today the IRS lacks the resources it needs to fully support these efforts. Since 2010, the overall IRS budget has fallen by nearly 20 percent, resulting in a significant decrease in the agency’s enforcement functions. This impacts compliance directly and indirectly: Rather than serving as a deterrent, a more limited IRS presence serves as an incentive to ignore compliance responsibilities, from both a civil and criminal perspective.

For CI in particular, since 2010, the number of employees has fallen by approximately 25 percent, from 4,017 in 2010 to under 3,000 today. This at a time when investigations are getting more complex, as highly sophisticated criminals are turning to new and hard-to-detect ways to hide illicit gains from our sight.

Last year, IRS-CI identified $10.4 billion from tax fraud and financial crimes and likely deterred at least an equivalent amount of such behavior, with a budget of just over $600 million. That is a direct return of more than 16:1. But this substantially understates the immensely valuable work that CI does, because having a significant IRS presence deters criminals from malfeasance.

With additional resources, CI will be able to do much more. The IRS’s efforts in this space are imperative to helping CI target oligarchs and those who facilitate hiding their assets. More broadly, a well-funded investigations unit is critical to ensuring that the IRS has a workforce that is able to pursue the illicit behavior of highly sophisticated criminals who reap billions and billions of dollars of profits annually through complex financial crimes.

IRS-CI agents have unparalleled experience in tracking how financial assets change hands and deploy state-of-the-art investigative tactics to tracing criminal behavior. Given this expertise, it is no surprise that CI has been called on to dedicate resources to the Kleptocapture task force convened to hold Russian oligarchs accountable for potential schemes to evade sanctions or launder money. These efforts fit in to CI’s broader objectives of persecuting wealthy tax evaders and financial criminals who deploy sophisticated techniques to reap billions in illicit gains each year.

Given the magnitude of the challenge it faces, it is imperative for CI to be adequately funded to investigate and prosecute criminals. Today, it is not—the workforce of CI has shrunk by 25% over the course of the last decade, which is consistent with diminishing resources across the agency that have impeded the IRS’ ability to serve American taxpayers and enforce the law. CI, like the rest of the IRS, is in desperate need of stable, long-term funding to develop a deeper understanding of the global financial landscape and trace and seize assets that today are in the hands of criminals. This is work that the IRS is well-equipped to do—once it has the resources to do it.

Read the full report here.