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The New Age oF INTerNATIoNAL CrImINAL TAx eNForCemeNT
(“ITG”), and the Global Illicit Financial Team (“GIFT”) In FY 2020, the NCIU initiated 117 referrals, including
all have international components and involve unique and numerous high dollar employment tax investigations,
innovative approaches to this fast-evolving and complex work that was recognized with the Commissioner’s Award
area of tax enforcement. in October 2019. NCIU also supports existing initia-
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Cross-border investigations are often the most com- tives involving the Foreign Account Tax Compliance Act
plex and time-consuming matters in IRS-CI’s inventory. (“FATCA”) and the broad category of “U.S. Citizens
Led by IRS-CI’s Office of International Operations Living Abroad (‘USCLA’).” 11
(“IO”), these investigations are supported by the IRS-CI The ITG consists of dozens of IRS-CI special agents,
attaches, deputy attaches, and investigative aides based investigative analysts, and professional staff with subject
in 11 countries, including Germany (Frankfurt), China matter expertise in international enforcement. Based in
(Hong Kong), England (London), Australia (Sydney), the Washington, D.C., and reporting to the Special Agent in
Netherlands (the Hague), Colombia (Bogota), Barbados Charge of the Washington Field Office, the ITG is focused
(Bridgetown), Mexico (Mexico City), Canada (Ottawa), “on investigations concerning international financial
UAE (Dubai), and Panama (Panama City). “The vigi- entities, ultra-high net worth individuals, and tax fraud
lance of IRS-CI Special Agent Attaches serves to uncover promotors.” In addition to ITG, IRS-CI has GIFT, an
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emerging schemes perpetrated by promoters, professional “an IRS-CI-led task force to investigate organizations
enablers, and financial institutions.” 4 that illicitly move money used to support international
In addition to its cross-border investigations, IO crime organizations.” These interagency efforts include
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“educates foreign governments and agencies on crime Homeland Security Investigations (HSI) and the Defense
detection, investigative techniques, case studies, emerg- Criminal Investigative Service (DCIS), and focus on,
ing trends, and best practices.” IO also works with other among other things, “illegal money transfer businesses;
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organizations to leverage bi and multilateral agreements international real estate fraud; financial institutions con-
and resources. From FY 2013 through FY 2020, IRS-CI cealing and disguising illegal transactions; identity theft;
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recommended more than 1,400 international tax prosecu- public corruption and extortion; government contract
tions, including charges brought against approximately fraud; and the sale of contraband goods.” 14
two dozen foreign financial institutions. 7 In July 2018, IRS-CI joined tax enforcement authorities in
IRS-CI’s international enforcement efforts are aided by Australia, Canada, the Netherlands, and the United Kingdom
the NCIU and ITG, initiatives established in May 2017. to establish the J5, designed to increase collaboration in com-
The NCIU was designed to develop and utilize data gath- bating international and transnational tax crime and money
ered by IRS business operating divisions (i.e., Exam, Field laundering. The J5 shares information and intelligence within
Collection, etc.) to identify areas of noncompliance and to existing treaties and laws to identify opportunities to pursue
assist in coordinating investigations at a national level. The those engaging in and facilitating criminal conduct, enhance
initial areas of concentration included international tax enforcement tools, and conduct joint operations. By the end
enforcement and significant money laundering, employ- of its first year, the J5 was involved in more than 50 sophisti-
ment tax enforcement, and microcap stock fraud. The cated international investigations involving individuals and
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results of these efforts have been characterized by IRS-CI entities, including one global financial institution and its
leadership as “must work” referrals. In its first year, the intermediaries suspected of enabling taxpayers to hide their
NCIU referred 55 cases to all 25 CI field offices, resulting income and assets. According to CI, “there have already been
in 32 matters elevated to subject criminal investigations. 9 hundreds of data exchanges between J5 partner agencies with
The NCIU uses sophisticated data analytics to identify more data being exchanged in the [first year of the J5] than
areas of noncompliance and select the most egregious the previous 10 years combined.” 15
cases for criminal investigations. The current areas of The J5 deploys an innovative investigative concept
emphasis include: that we have not seen before, but are monitoring closely.
■ COVID-19 related fraud, The previous standard model for international coopera-
■ virtual currency, tion solely involved rigid treaty and information-sharing
■ international tax, protocols. While these are essential to the legal sharing of
■ significant money laundering, information between treaty partners, the J5 model appears
■ employment tax, to deploy a more hands-on interaction and sharing of
■ the Department of Homeland Security’s National expertise and best practices between various levels in each
Targeting Center, and country to amplify the results. Offshore tax promoters
■ the IRS Whistleblower Program. seldomly abide by Country borders or market only to one
56 JOURNAL OF TAX PRACTICE & PROCEDURE WINTER 2020