The Joint Global Tax Enforcement Staff, a group of five national tax authorities, including the Internal Revenue Service’s Criminal Investigation unit, along with the United Kingdom, Canada, Australia and the Netherlands, issued a pair of advisories explaining how cryptocurrency trading desks and over-the-counter cryptocurrency payment processors can be used to hide and move funds linked to criminal activity.
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He notice on OTC cryptocurrency trading desks notes that they can help clients hide illicit activities and circumvent anti-money laundering controls. Recent estimates suggest that the platforms allow people to buy and sell digital assets outside of a public exchange and account for a large portion of cryptocurrency trading activity, with daily trading activity totaling $1.44 billion compared to $74.51 million on cryptocurrency exchanges. Trading desks provide clients with anonymity and reliability when moving large sums of money or cryptocurrency, potentially functioning as an obfuscation tool for tax evaders and money launderers. To date, nearly $236 billion in suspicious activity has been reported to the Treasury Department’s Financial Crimes Enforcement Network connected to these trading platforms.
“Regulatory and law enforcement agencies cannot monitor in real time the billions in cryptocurrency assets that move daily from OTC counters, as many of the OTC counters are not identified or labeled in many of the widely used commercial blockchain analysis tools,” the notice says. “In addition, OTC desktop transactions often occur internally and are not visible on the publicly available blockchain.”
The other notice, about Demystifying crypto payment processorsdescribed how they enable direct payment for goods and services using digital assets. While the platforms offer fast and convenient transactions, they can also be used to hide and spend illegally obtained digital assets or to commit tax evasion. From 2020 to 2024, suspicious activity reports linked to crypto payment processors increased more than 1000%. To date, financial institutions and digital asset providers have reported $5 billion in suspicious activity associated with cryptocurrency payment processors to FinCEN.
J5 recommends that financial intelligence units leverage specific keyword searches when reviewing suspicious activity reports to identify transactions or patterns indicative of money laundering or tax evasion taking place on these platforms.
“In recent years, luxury goods have integrated cryptocurrency payment processors into their payment capabilities,” the notice said. “Some of them include Rolls-Royce and Bentley dealers, Ferrari, yacht brokerage and luxury watches. The ability to abandon cryptocurrencies and purchase luxury items can be an attractive concept for tax evaders and illicit actors seeking to use the proceeds from tax evasion, money laundering and other financial crimes.”
In September 2024, the J5 Cyber Challenge focused on data involving OTC cryptocurrency trading desks and cryptocurrency payment platforms and served as the basis for publishing the two notices. J5 Cyber Challenges bring together experts from J5 member countries to review data and identify quality leads from a variety of open and research sources. The alliance includes the Australian Taxation Office, the Canada Revenue Agency, the Netherlands Tax Intelligence and Investigation Service, Her Majesty’s Revenue and Customs in the UK and IRS Criminal Investigation in the US.
