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Intl. Tax Crackdown: Coalition Runs Dozens of Investigations (UPDATED)

Linas Kmieliauskas
Last updated: | 3 min read

International coalition against tax criminals, J5, that also targets crypto-related crimes, is involved in more than 50 investigations involving international enablers of tax evasion, including an undisclosed global financial institution and its intermediaries who facilitate taxpayers to hide their income and assets, the Canada Revenue Agency said in a press release. (Updated on 08:23 UTC: updates throughout the entire text.)

Source: iStock/AndreyPopov

Meanwhile, a separate report in The Sydney Morning Herald that quotes Will Day, a deputy commissioner at the Australian Taxation Office (ATO), claims that J5 is working on 60 investigations while Australia directly involved in 12 investigations.

As reported in July 2018, the coalition was formed as a response to a request to reduce tax crime, made by the Organisation for Economic Co-operation and Development. The J5 consists of the Internal Revenue Service of the United States, as well as financial institutions from Australia, Canada, the Netherlands and the UK, and is specifically focusing on cross-national tax crime threats including cyber-crime and cryptocurrency as well as enablers of global tax evasion.

“At no other time have criminals been at greater risk of being caught,” Day was quoted as saying. Since the creation of J5 a year ago, the tax authorities of its members shared more data between them than they did over the whole of the previous decade.

However, the official press release by the Canadian authority did not specify how many of the ongoing investigations are related to cryptocurrency.

As reported in May, the Dutch Fiscal Information and Investigation Service (FIOD), has already clamped down on one of the world’s leading cryptocurrency mixing service

“The cooperation between the J5 countries is becoming more effective and operational,” said Hans van der Vlist, General Director of FIOD. “Two weeks ago we took offline an important online mixer for cryptocurrencies. We are now analyzing the seized information. We expect good leads for investigations in J5 countries. Another example is the FCInet matching system that will help us in the fight against transnational fiscal and financial crime.”

FCInet is a decentralized virtual computer network that enables agencies to compare, analyze and exchange data anonymously.

Leaders from five members of J5 met in Washington, DC, this week to mark the one-year anniversary of the formation of the coalition. The meeting coincided with a global cyber training event hosted by the United States at the World Bank. Training was provided on cryptocurrency, blockchain and the dark web.

Other moves

Also in the Netherlands, the country’s chief financial regulator, the Netherlands Authority for the Financial Markets, told the government in January 2019 that it should ban anonymous trading and force all Dutch wallet and crypto exchange services to apply for government- or regulator-issued trading licenses.

Meanwhile, in March, the Canada Revenue Agency confirmed that there were over 60 active audits related to cryptocurrency at the time. The federal tax agency is also asking those who have been targeted dozens of crypto activity-related questions.

However, not only members of J5 are targeting crypto-related tax crimes.

As reported on Wednesday, cryptocurrency tax evasion is rife in Japan as some 50 people and 30 companies have reportedly failed to declare over USD 92 million worth of cryptocurrency transactions.

One of the Japanese companies involved with the fast-developing crypto tax evasion scandal has been named as Ecladocool (transliteration), the operator of Circle Coin, a company based in Naha. Nikkei reports that tax authorities in Tokyo and Okinawa have discovered that the Circle Coin operator appears to have created a fake company called Neoseed. The operator had claimed Neoseed was based in the United States but actually appears to have been running out of Tokyo.

The tax authorities state that the Circle Coin used Neoseed as a front – using it to hide over USD 8 million worth of Circle Coin sales in FY2017. The authorities claim Circle Coin’s outstanding tax bill stands at around USD 2.8 million.

Meanwhile, Denmark’s national tax agency announced in January that it got access to the historical data of three unnamed domestic exchanges in the period 2016-2018, suspecting that a large number of investors may owe unpaid taxes on their earnings.

Also, in Bulgaria, the National Revenue Agency said in the same month that it started a spate of inspections on companies that trade cryptocurrencies, “to establish whether companies and their clients comply” with tax laws.