September 24, 2021

Volume XI, Number 267

Advertisement

September 24, 2021

Subscribe to Latest Legal News and Analysis

September 23, 2021

Subscribe to Latest Legal News and Analysis

September 22, 2021

Subscribe to Latest Legal News and Analysis

Key Takeaways | Cryptocurrency Global Tax Enforcement: What Investors and Companies in the Industry Need to Know NOW [VIDEO]

During a recent program discussing the latest government enforcement efforts related to cryptocurrency, we spoke with Gary Alford, one of the leading Internal Revenue Service (IRS) agents in their crypto enforcement efforts, Perry Carbone, Chief of the White Plains Office (US Attorney’s Office – SDNY) and Andy Cole, former Director of Specialist Investigations at HM Revenue & Customs in the United Kingdom, about how investors and companies in the virtual currency industry should address enforcement actions. Below are key takeaways from the conversation.

ENHANCED ENFORCEMENT – UNITED STATES

  • The time to act is now. The IRS and the US Department of Justice (DOJ) are collecting virtual currency data at a rapid pace while simultaneously moving forward with tax enforcement cases. The IRS Criminal Investigation (IRS-CI) revamped its operations to “do more with less” using new technology that will move investigations at a faster pace.

  • The IRS joined its civil and criminal units through Operation Hidden Treasure and is also working with outside experts in the field—along with specially-trained IRS agents—to pursue tax enforcement and asset seizure. This is a key agenda item for the US Department of the Treasury and is not going away any time soon.

  • The IRS and the DOJ expect taxpayers to comply voluntarily with all tax obligations. Despite these recent developments, US taxpayers have limited guidance from the IRS. Engaging with professionals in the space to evaluate the options available to taxpayers is crucial to assessing and ensuring compliance with cryptocurrency taxation.

INTERNATIONAL EFFORTS

  • Global collaboration is nothing new, but it is now on the rise. Agencies around the world are enhancing their cross-border information and resource sharing to investigate tax crimes efficiently and effectively. The J5, an important component of this global collaboration, is prepared to pool some of the world’s most sophisticated data analytical tools so that intelligence can be screened, searched and/or identified.

  • The Organisation for Economic Co-operation and Development (OECD) and its governing body will likely start requiring cryptocurrency exchanges to collect customer due diligence information. The window of anonymity around cryptocurrency transactions has closed rapidly in recent years.

  • The global Common Reporting Standard (CRS) has been in force since 2017. Under the CRS, tax authorities of over 100 countries (including most of the traditional “tax havens”) automatically exchange tax, account and payment information with each other in order to assist in tax collection and enforcement action.

FOR INDIVIDUALS

  • Moving forward, the “knowledge and willfulness” element needed for criminal cases will be much easier for the DOJ to prove because the “virtual currency question” is now at the top of Form 1040. The prominent location of this question is “a game changer” for criminal tax prosecutions.

  • Cryptocurrency tax crimes are no longer “add on” charges to other criminal prosecutions, such as narcotics or fraud crimes. The DOJ expects to bring independent cryptocurrency criminal tax cases and take these prosecutions to “the next level,” including prosecutions of more routine tax matters.

  • Individuals serving as board members on behalf of a private equity fund may face personal responsibility for a company’s failure to meet compliance requirements under its control.

FOR CORPORATIONS

  • The DOJ revised its guidance relating to compliance programs and now expects companies to re-assess the effectiveness of their current compliance programs. These programs should be robust, data-driven and address the risks associated with the company’s business model.

  • Companies need to affirmatively and continuously evaluate their business risks and ensure their compliance programs address each of these areas. If a company is in the cryptocurrency industry, the risk of facilitating tax evasion is high and the compliance program for the company needs to address that risk.

  • In the United Kingdom, the Criminal Finances Act 2017 makes a company’s failure to prevent its associated persons from facilitating tax evasion a criminal offense. The law applies to UK and non-UK companies and taxes. The only defense is where a company can prove that it had implemented reasonable prevention procedures.

© 2021 McDermott Will & EmeryNational Law Review, Volume XI, Number 208
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Partner

Simon Airey focuses his practice on global, cross-border and internal investigations, financial and regulatory crime, bribery and corruption, money laundering, tax and fraud inquiries, data breaches, dawn raids, asset tracing, international enforcement and corporate compliance issues.

He has conducted a wide range of investigations and corporate defense assignments in different sectors, including construction, defence, financial services, gambling, oil and gas, logistics, pharmaceuticals and telecommunications. Simon represents both companies...

+44 20 75773470
Andrea S. Kramer Corporate Financial Attorney McDermott Will & Emery Law Firm
Partner

Andrea (Andie) S. Kramer has a sophisticated and unique multi-disciplinary legal practice that covers all aspects of financial transaction, derivatives, and cryptocurrency, with a focus on taxation, regulation, contract design, trading operations and documentation. Andie helps clients successfully resolve difficult legal situations, including federal and state regulatory matters, adversarial proceedings, and tax planning and compliance issues while addressing interrelated business objectives, regulatory and legal requirements, and public policy.

In recent years, Andie has focused on...

312-984-6480
Carlos F. Ortiz Corporate Litigation Attorney Mcdermott Will & Emery Law Firm
Partner

Carlos F. Ortiz is a member of the Litigation and White Collar Defense teams and his work has a particular emphasis on white collar defense and investigations. He uses his prominent 15-year background as a high-level federal prosecutor to assist clients with matters relating to the Foreign Corrupt Practices Act (FCPA), high-risk tax controversies, offshore tax issues, anti-money laundering, e-commerce fraud, healthcare fraud, as well as allegations of fraud against government agencies and financial institutions. Over his career in private practice he has secured the...

1 212 547 5566
Kevin Spencer, McDermott Will & Emery LLP , Tax Litigation Attorney
Partner

Kevin Spencer focuses his practice on tax controversy issues. Kevin represents clients in complicated tax disputes in court and before the Internal Revenue Service (IRS) at the IRS Appeals and Examination divisions.

 

In addition to his tax controversy practice, Kevin has broad experience advising clients on various tax issues, including tax accounting, employment and reasonable compensation, civil and criminal tax penalties, IRS procedures, reportable transactions and tax shelters, renewable energy, state and local tax, and private client matters. After earning his Master of...

202-756-8203
Katharine Suominen Litigation Attorney McDermott Will & Emery New York, NY
Associate

Katharine Suominen focuses her practice on litigation matters, including complex commercial litigation for public and private companies, white collar criminal defense and investigations, internal corporate investigations and design and implementation of compliance programs, and insurance coverage disputes.

Katharine has experience with both state and federal court proceedings.

Katharine maintains an active pro bono practice, previously working on projects with a focus on human rights issues. She has also represented pro bono clients in defamation, veteran’s disability, and...

212-547-5671
Advertisement
Advertisement
Advertisement