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IRS looks to partner with crypto companies to combat financial crime

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(Kitco News) - Amid the push to regulate the cryptocurrency industry in the wake of the collapse in value seen in 2022, the U.S. Internal Revenue Service (IRS) is looking to ramp up its oversight of the nascent asset class by hiring hundreds of new agents in 2023, many of whom will be directed to work on digital assets and cybercrime.

During a recent interview conducted by The Wall Street Journal’s Risk & Compliance Journal with Thomas Fattorusso, the special agent in charge of IRS-CI’s New York field office, the IRS agent suggested that “Cryptocurrency is here to stay” and that the tax-collection agency wants to partner with the industry to fight financial crime.

The IRS-CI is the law-enforcement arm of the IRS – often referred to as “accountants with guns” – and is in charge of handling cases ranging from money laundering to Russia sanctions.

According to Fattorusso, the agency cannot take a hostile approach to the technology and instead must embrace it since “it isn’t going anywhere anytime soon and it’s becoming more legitimate as the years roll on,” along with becoming more sophisticated.

Fattoruso stressed that it is a goal of the IRS to work towards getting more cooperation from crypto companies and developing a non-contentious relationship that is more symbiotic than oppositional.

“It helps them in their legitimacy. This is a new industry for everybody. I think we’re still trying to feel our way around it. The companies are feeling their way around it,” the special agent said.

The IRS is preparing to crack down on "hundreds" of crypto tax cheats

While many have voiced objections to the revolving door of talent that gets shuffled between the government and the crypto industry, Fattoruso signaled that the agency welcomes the process as a way to foster ties between the two parties.

“We’ve had several of our cyber agents and managers go to private companies. We are finding those partnerships to be beneficial because they understand what we need from a law-enforcement aspect to investigate cybercrime,” he said. “And they can help us in that arena. And now we have an open flow or open dialogue we didn’t have before because we didn’t have a contact there.”

“We’re hoping to develop those relationships even further,” Fattoruso added.

The IRS-CI boss also noted that the agency is currently in the midst of a hiring push with a focus on recruiting younger talent with a technical background that wants to dedicate their life to service, combat fraud, and do general law-enforcement work. “We’ve been very good about hiring data scientists in CI in the last few years, which is brand new for us,” he said.

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