The IRS needs a crypto 'subject matter expert' to help beef up its crypto investigation efforts

One can never be entirely sure what a fairly secretive government agency is truly up to. But based on various pieces of information released by U.S. Internal Revenue Service (IRS) recently, it appears that the agency is intent on building an in-house army of sophisticated crypto-fraud investigators.

The latest evidence: a new job posting — dated June 30 — that describes a role with the unassuming title of “fraud detection analyst.” A closer look suggests a more accurate title might be crypto-fraud analyst.

The posting lists eight bullet-point responsibilities, with a heavy emphasis on strategy for fighting cybercrime. But two of the eight bullets tie back to crypto and blockchain in a big way.

In fact, the very first responsibility listed is telling: “Make recommendations that significantly influence the development or modification of nationwide Cyber Crimes policies and programs dealing with Virtual/Cryptocurrency."

Another bullet says the analyst will need to “serve as the Subject Matter Expert (SME) as it relates to Virtual/Cryptocurrency.”

The subject matter expert. The agency isn’t just looking for someone to come in off the street and pick up the crypto baton — rather, it’s seeking a candidate with “experience applying research and analytics around virtual currency, cryptocurrency, different blockchain platforms.”

Simply put, it’s looking for someone who knows the tech and can build the basis for deeper work on matters involving cryptocurrency.

The IRS has long been a customer of crypto companies focused on network analytics. As of March 2019, the IRS accounted for about 40 percent of spending on blockchain analysis by government agencies, according to an analysis by The Block Research.

But the agency now appears intent on beefing up its in-house investigative capabilities.

Indeed, the new job description coincides with a recent public request by the agency for information about how to trace technically sophisticated cryptocurrency systems like privacy coins and Layer 2 protocols. By name, the document called out Monero, Zcash, Dash, Grin, Komodo, Verge, Horizon, Bitcoin’s lightning network, Ethereum’s Raiden Network, Celer Network, side chains and even the Schnorr Signature algorithm.

The request for information (RFI) acknowledged that "there are few investigative resources for tracing transactions" in these areas but that "[t]he [Criminal Investigation] Cyber Crimes program is working to get in front of this trend through this RFI."

Finally, thanks to FY2021 budgeting documents, we already know that the IRS is after money to “support the hiring of 108 special agents to conduct more criminal investigations related to cyber and virtual currency.” With those workers in place, the IRS said that it could identify as much as nearly $200 million in otherwise missed revenue.

As the funding documents noted:

"As a result, about 450 additional criminal investigations are projected to be completed from FY 2023 – FY 2025 once the new hires reach full potential. Additionally, CI estimates that as a result of the additional special agents, CI will identify $197.3 million annually in tax revenues either not reported to the IRS or fraudulently refunded by the IRS."

A budget request, a request for information and a job posting are obviously just first steps. The IRS had better hope it can find its subject matter expert before the subject matter changes once again. But hey, we can’t say they aren’t trying.