IRS, Chainalysis: Crypto analysis for Ukraine

IRS Criminal Investigation (IRS-CI), the criminal investigative arm of the IRS, and Chainalysis, the blockchain data platform, announce new training courses to provide crypto analysis and cyber investigation tools to Ukraine. 

Full details are below. 

Chainalysis and IRS support Ukraine in crypto analytics 

As anticipated, the IRS and Chainalysis have teamed up to provide cybersecurity tools, and not only, to Ukraine at this particular time in history. 

As we know, Chainalysis is the blockchain platform that provides software, services, and research to government agencies, stock exchanges, financial institutions, as well as insurance and cybersecurity companies in more than 70 countries. 

On the other hand, IRS-CI is the criminal investigative arm of the IRS, responsible for conducting investigations into financial crimes, including tax fraud, drug trafficking, money laundering, public corruption, healthcare fraud, identity theft and more.

The goal of the courses sponsored by the two entities is to support Ukrainian authorities in enforcing sanctions and conducting effective cyber investigations at this sensitive time in history. 

In fact, as part of the partnership with Ukraine, IRS-CI donated licenses for Chainalysis Reactor, a cryptocurrency investigation platform, for up to fifteen users.

Specifically, the training enhances existing information sharing and lays the groundwork for new collaboration between Ukrainian and US law enforcement agencies to target financial networks used by sanctioned Russian oligarchs attempting to hide their assets.

The initiative has been well received in Ukraine, so much so that the cyber police department of the National Police of Ukraine, the Economic Security Bureau, the Information and Cyber Security Department of the Security Service, and the Prosecutor General’s Office are all participating in the cyber training.

Currently, IRS-CI is conducting twenty-three sanctions-related investigations. The agency is actively working with the Office of Foreign Assets Control to support sanctions designation investigations and freeze assets controlled by or associated with those on the list of specially designated nationals and blocked persons. 

Some statements regarding Chainalysis and IRS initiatives in Ukraine 

Regarding the initiatives proposed by Chainalysis and the IRS in Ukraine, we see that Jim Lee, head of the IRS-CI, stated the following: 

“Global financial crimes often consist of complex webs of offshore holdings and anonymous transactions. These trainings help participants can hone their digital investigative skills to trace the source of blockchain funds and unmask cryptocurrency transactions with cryptocurrency forensic tools.”

He then renewed his belief that sharing tools not only safeguards the US financial system, but also the global economy. 

In contrast, Eduard Fedorov, acting director of Ukraine’s Economic Security Office, said the following: 

“It is important for us to identify all Russian assets on the territory of Ukraine. We resist the aggressor state not only on the battlefield, but also on the economic front. The international experience of conducting investigations using digital data and the study of algorithms for combating financial networks contributes to increasing the professionalism of our employees.”

Not only that, Michael Gronager, co-founder and CEO of Chainalysis, also said: 

“From the facilitation of donations to ransomware attacks and sanctions evasion, cryptocurrency is playing an unprecedented role in Ukraine in both good ways and bad.  We commend the work of IRS-CI in empowering Ukrainian law enforcement with the data, tools, and training to detect and investigate illicit blockchain activity as the stakes for doing so continue to accelerate.”

Finally, Yurii Vykhodets, police colonel of the Cyber Police Department of the National Police of Ukraine, said: 

“Today, the Cyber Police counteracts not only the usual facts of crime, but also provides resistance to Russian forces on the internet. One key area is the identification and elimination of centers of support for occupation forces that raise funds for the purchase of things necessary for the war.”

Chainalysis on how scammers strategize depending on market conditions 

During a recent webinar regarding crypto-implemented crimes that affect consumers, Eric Jardine, head of cybercrime research at Chainalysis, explained how fraudsters modify their strategies according to changes in the market.

In fact, according to Jardine, although overall revenue from crypto scams declined in 2022, not all frauds played out the same way, he explained: 

“One of the novelties of this year’s report was the division of scams into types. We found that not all scams behaved the same way in the context of the bear market.”

As we all know, the 2022 collapse of Terra put many crypto investors on edge, and as a result scammers turned to other strategies, such as exploiting greed with free giveaway scams. 

In fact, Jardine went on to explain the following: 

“It is suggestive that there is an adaptation on the part of scammers and as market conditions make investment scams unlikely to be profitable, they could replace their tactics with other scams that play on a different emotional sense.”

According to the data presented by Jardine, as soon as investment scams cease to be effective, ‘romantic’ scams and giveaways increase, suggesting that scammers are not just “playing the same script over and over again” but are able to change depending on market conditions.