by Mike Godfrey, Tax-News.com Washington
17 July 2020
On July 13, 2020, the US Internal Revenue Service (IRS) issued a progress report on the last two years’ work of the J5 group of five advanced countries, who are working collaboratively to tackle cross-border tax fraud.
The J5 group is made up of the tax enforcement authorities of Australia, Canada, the Netherlands, the UK, and the US, and was formed in mid-2018 in response to the OECD’s call to action for countries to do more to tackle the enablers of tax crime.
According to the IRS, the J5’s initial focus was on virtual currency and establishing platforms so that each country can share information more efficiently. The group also targeted those engaged in offshore tax evasion.
Since the J5’s inception, hundreds of data exchanges between partner agencies have occurred, with more data being exchanged in the past year than the previous 10 years combined, the IRS said.
According to the IRS, tax offenders are embracing more complex methods to commit tax fraud, including by creating multiple mechanisms and structures that are split across jurisdictions.
Key to the J5’s work on tackling offshore tax evasion have been events known as “Challenges,” which have been hosted by two J5 countries so far. These are aimed at developing operational knowledge, with the first J5 “Challenge,” in Utrecht in 2018, bringing together leading data scientists, technology experts, and investigators from all five countries. This event identified, developed, and tested tools, platforms, techniques, and methods to better identify professional enablers of offshore tax fraud.
The following year saw the US host a second “Challenge” in Los Angeles. This event included investigators, cryptocurrency experts, and data scientists, who sought to support efforts to track down individuals perpetrating tax crimes around the world.
The IRS said that one of the J5’s first major successes occurred last week when a Romanian individual was arrested in Germany and admitted to conspiring to engage in wire fraud and offering and selling unregistered securities in connection with his role in the BitClub Network, a cryptocurrency mining scheme worth at least USD722m. This plea was the first of its kind under the J5 umbrella and stemmed from collaboration with the Netherlands during the “Challenge” in Los Angeles in 2019.
The J5 began seeing operational results in early 2020 when the group participated in a globally coordinated day of action to tackle a suspected offshore tax evasion scheme. The action was part of a series of investigations in multiple countries into an international financial institution located in Central America, whose products and services are believed to be facilitating money laundering and tax evasion for customers across the globe. Search warrants were issued, interviews undertaken, and subpoenas issued in each country and significant information was obtained and shared as a result, the IRS reported, adding that this investigation remains ongoing.
The IRS said an important development has been the development of electronic platforms to enable each country to share information in a more organized manner. For example, FCInet, a decentralized virtual computer network, has been created to enable the agencies to compare, analyze, and exchange data anonymously.
Reflecting on the group’s second anniversary, Don Fort, Chief of IRS Criminal Investigation, said: “To see each country participate in a coordinated enforcement action all over the world at the same time with the same goal in mind was a real watershed moment for this organization. And that was just the beginning. With dozens of cases in our collective pipelines, I’m excited to see what the next year brings in terms of operational results.”