IRS Sees Crypto Companies as Potential Crime-Fighting Partners

In the alphabet soup of federal law-enforcement agencies, IRS-CI hasn’t attracted as much attention as its counterparts at the Federal Bureau of Investigation or Drug Enforcement Administration. But the 102-year-old law-enforcement arm of the IRS—whose agents are sometimes affectionately referred to as “accountants with guns”—is one of the top U.S. financial crime enforcers, handling cases from money laundering to Russia sanctions. It has also turned its eyes to cryptocurrency as one of several federal agencies trying to grapple with the burgeoning industry. 

Mr. Fattorusso, who spoke with The Wall Street Journal’s Risk & Compliance Journal, said IRS-CI, which often competes with the flush crypto sector for talent, welcomes the revolving door—the shuffling of talent between government and industry—as a way to foster ties. Responses have been edited for clarity and length.

WSJ: How do you view digital assets? Are you willing to work with these companies?

Mr. Fattorusso: We can’t be hostile to the technology. We have to embrace it. 

Cryptocurrency is here to stay, as far as I’m concerned. It isn’t going anywhere anytime soon and it’s becoming more legitimate as the years roll on—it becomes more sophisticated. My thought is that those relationships will develop as the years go on and [as] the companies become more comfortable with dealing with the federal government. I don’t see how we can operate in this space without it.

WSJ: Are you getting the level of cooperation and partnership from cryptocurrency companies that you would like?

Mr. Fattorusso: That’s something that we’re always working toward. I can’t say whether we’re receiving that or not, but that’s always the end goal, to have those partnerships and to have a relationship that isn’t contentious. More of a symbiotic relationship.

It helps them in their legitimacy. This is a new industry for everybody. I think we’re still trying to feel our way around it. The companies are feeling their way around it.

WSJ: The digital-assets space has some areas that are highly technical. Do you have the talent you need?

Mr. Fattorusso: We’ve been very fortunate, especially in the last couple of years. We’re on a hiring push right now, so we’re hiring several hundred agents a year and sending them to the academy with the hopes that they come out and they become part of the team of the finest financial investigators. 

But a lot of them have a technical background. They’re younger. They grew up in the technology world. More so than me, for example, who didn’t grow up in that world.

Sometimes it’s hard to compete with private companies. But there are those out there that want to dedicate their life to service, that want to combat fraud, that want to do law-enforcement work.

We’ve been very good about hiring data scientists in CI in the last few years, which is brand new for us.

WSJ: On the topic of competing with the private sector, certain federal agencies have been known to have a revolving door, where talented people come work for them, then join the private sector. Is that happening in your agency?

Mr. Fattorusso: We’re starting to see that more often now, especially with cyber. We’ve had several of our cyber agents and managers go to private companies. We are finding those partnerships to be beneficial because they understand what we need from a law-enforcement aspect to investigate cybercrime. And they can help us in that arena. And now we have an open flow or open dialogue we didn’t have before because we didn’t have a contact there. 

They’ll go out to the private sector, and they’ll come back to government and back out to the private sector. Nothing wrong with that at all. They’re gaining experience and they’re bringing that experience wherever they go. And if they bring it back to us in law enforcement or they help us when they’re on the private side, that only helps us.

If you’re familiar with what’s been going on in some of these exchanges, you know that our agents are marketable, and they’re getting picked up in these various private companies because of the work that they do and because of the knowledge that they bring. We’re hoping to develop those relationships even further. ‘OK, you used to work here with us, maybe you can help us with investigations.’

Write to Richard Vanderford at Richard.Vanderford@wsj.com