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IRS Leads Criminal Investigation Against Crypto ATMs and Kiosks

November 18, 2019
Ross Peili


IRS Leads Criminal Investigation Against Crypto ATMs and Kiosks

A top-shelf agency officer revealed the Internal Revenue Service (IRS) is focusing on potential criminal activities surrounding taxation issues related to cryptocurrency ATMs, and Kiosks in the US.

While there are not any public cases filed subjecting crypto ATMs, and kiosks so far, IRS’ Criminal Investigation team is working with US law enforcement agencies to monitor potential illegal activities in the sector, IRS Criminal Investigation Chief John Fort said to Bloomberg Law earlier this week, on November 15th.

Just last month, the IRS had published a new guideline as an update to its 2014 policy, affecting cryptocurrency owners, this time treating the possession of digital currencies and virtual assets as “property”.

It is highly possible, that the new regulations showcased statistical data suggesting that cryptocurrency ATM users and Kiosk brokers are still active, while their activity and transparency are extremely limited to financial watchdogs such as the Internal Revenue Service. 

“If you can walk in, put cash in and get bitcoin out, obviously we’re interested potentially in the person using the kiosk and what the source of the funds is, but also in the operators of the kiosks.”Fort said.

In 2019, Bitcoin and crypto ATMs are widespread all over the world, and obviously, the US is a huge market for such service providers. The thing is that, while these companies are operating under a legal framework, their respective customers may be still involved in illegal monetary activities as the ATM will only ask you for a BTC address and nothing more that could identify the user or his intentions. 

ATM kiosks will usually charge something between 10% and 20% out of each transaction making them not the ideal choice to enter the crypto world or redeem your crypto into fiat, yet there is a huge database of customers who still prefer cryptocurrency ATMs, despite the fact there are faster and cheaper solutions to exchange crypto and fiat, making money laundering a high possibility in the sector.

Fort said that there are some ‘know your customer’ (KYC) procedures during each operation, yet it can be quite unclear at the end who is trading the crypto, where did he get the funds from, and where the funds actually end up, urging the investigation to focus firstly on ATM providers, followed by their respective customers.   

“They’re required to abide by the same know-your-customer, anti-money laundering regulations, and we believe some have varying levels of adherence to those regulations,” he said. 

Furthermore, the IRS Criminal Investigation Chief said that there is an emerging threat in the area, promoting the lack of transparency and visibility for ATM users, resulting in big-scale tax issues most likely related to illegal activity. 

Finally, Fort believes that as things tighten up in the U.S. cryptocurrency users are trying to find their way into foreign crypto exchanges to avoid regulations, and that is an area the IRS is planning on focusing next.