By Hope Krebs, Partner, Duane Morris LLP
This week the Joint Chiefs of Global Tax Enforcement (J5) brought together investigators, cryptocurrency experts and data scientists in a coordinated push to track down individuals and organizations perpetrating tax crimes around the world. The J5 (which is comprised of the Australian Taxation Office (ATO), the Canada Revenue Agency (CRA), the Dutch Fiscal Information and Investigation Service (FIOD), Her Majesty’s Revenue and Customs (HMRC) from the United Kingdom and the U.S. Internal Revenue Service Criminal Investigation Division (IRS-CI)) has been working together since 2018 to gather information, share intelligence and conduct coordinated operations in each country’s fight against transnational tax crime.
The annual meeting (referred to by the J5 as “The Challenge”) was focused this year on Financial Technology (FINtech) companies. In its press release issued March 25 (IR-2021-64), the IRS acknowledged that many FINtech companies have adopted compliance regulations and are partnering with governments and law enforcement in prohibiting financial crime. However, the IRS cautioned that due to the online nature of the products, the novelty and the lack of regulation and compliance in some areas, the FINtech industry can be used by tax avoiders and money launderers to commit crimes.
This year the J5 Challenge was held virtually and split into multiple phases. In the first phase of the Challenge, legal experts from the five countries discussed the fiscal, compliance and criminal options that each country had regarding FINtech companies. During the second phase, the five countries developed a list of specific companies where leads suggested criminal behavior. By the conclusion of the Challenge, the IRS press release stated that each country identified specific companies that will be a part of their investigations.
The IRS press release also touted two successes this month resulting from J5 collaboration – the early-March indictments of the CEO and an associate of Sky Global on charges that they participated in a criminal enterprise that facilitated the transnational importation and distribution of narcotics through the sale and service of encrypted communications devices, followed by the ten-count indictment earlier this week charging Jason Peltz with securities fraud, money laundering, tax evasion and a variety of other offenses.
This appears to be just the beginning of the J5’s coordinated efforts to clamp down on the use of the FINTech industry by those seeking to evade taxes and committing financial crimes. For more on the J5, visit the IRS website.