International Tax Enforcement is a complicated and often intricate process given the nature of tax laws and local enforcements across the world. FATCA was one step toward the related exchange of information to identify and enforce. However, other measures are also needed especially when evasion is involved and the intent is criminal. In cases of International Tax Evasion, information becomes the key. How does a government identify, locate, and establish a crime of criminal tax evasion especially when various currencies are involved and money is literally moving across continents in various forms. With cryptocurrencies added into this mix, the trail becomes even harder to track and prove.
With these facts in the background, five countries namely the USA, Netherlands, UK, Australia, and Canada joined forces in 2018 to form the Nationally Coordinated Investigations Unit (NCIU). The Joint Chiefs of Global Tax Enforcement from these five countries, known as the J5, decided to bring together investigators, cryptocurrency experts, and data scientists to establish a methodology to track down tax criminals who use cryptocurrency such as Bitcoin.
This agency would use a data-driven approach to investigations of tax evasion, money laundering etc. Four working groups were formed:
- CryptoCurrency group
- Data Analytics
- Offshore Professional Enablers
- Technology Platforms
Through these groups, the Unit aimed to enhance evasion investigations, identify specific targets/individuals, improve information sharing and intelligence, and mobilize at the community level. The NCIU identified people who were likely to be involved in tax scams, evasion activities and categorized them accordingly – lawyers and accountants who structure evasive transactions, insurance companies, and fiduciary firms who facilitate, aid, and abet such structures and non- compliance. Some of the more noteworthy successes of this group have been a sting operation featuring many Australians evaders, penetrating a bitcoin money-laundering ring, the UBS case in France, just to name a few.
The OECD too focuses on the ten principles governments must follow in their efforts to fight financial and tax crimes:
- Ensure tax offences are criminalized
- Devise effective strategy
- Provide adequate investigative powers
- Provide powers to freeze, seize and confiscate assets
- Have an organizational structure in place
- Provide adequate resources for investigation
- Make tax crimes a predicate offence for money laundering
- Have an effective inter-agency cooperating framework
- Ensure international cooperation mechanisms
- Protect Suspect’s rights
Cross-national tax crimes, cybercrime, and the use of cryptocurrency in cyber-crimes have become shared areas of concern across the globe. As digital footprints and virtual transactions rise, the related tax evasion and cyber-crime scenario will also heat up and nations across the globe need to be prepared to handle that.