- Ukraine is working with the IRS to trace crypto being used by Russians to evade sanctions
- Investigators are using Chainalysis tools to aid their efforts
- Some Russians have been trying to use crypto to safeguard their money
The Internal Revenue Service (IRS) is collaborating with Ukraine in efforts to track the cryptocurrency transactions of individuals who are attempting to evade Russian sanctions. As part of this partnership, the IRS is offering the Ukrainians access to a Chainalysis tracing tool and providing specialized training to their law enforcement officials in identifying such activities. Russians have been attempting to use cryptocurrencies to evade sanctions since they were first applied last February following the invasion of Ukraine, but not to the extent that was speculated in the early stages of the conflict.
Sanctions Forced Russians to Act
Western sanctions were quick to impact Russian oligarchs following the invasion, and it didn’t take long for crypto critics to point to digital assets as a popular path for rich Russians to secure their wealth.
The scale of such activities was massively over-exaggerated at the time, but Ukrainian officials are clearly concerned enough about the ongoing activities in this area to recruit the IRS’s Criminal Investigation division (IRS-CI) to help them trace the flow of Russian money through crypto.
Training and Tools Offered to Ukraine
Michael Gronager, the co-founder and CEO of Chainalysis, told Bloomberg that the crypto space still lacks the liquidity required to enable widespread evasion of sanctions, although it is occurring on a smaller scale.
Gronager also observed that cryptocurrency is playing an unprecedented role in the war, with donations being made in support of both sides. As an example, he mentioned that around $5 million has been transferred via this method to roughly 100 pro-Russia groups in the past year.
The IRS is supporting Ukraine’s access in terms of software through the use of a Chainalysis tool that aids in cryptocurrency-related investigations and has also arranged training sessions for the country’s law enforcement officials on how to trace blockchain transactions.
