UK HMRC Invests in Technology to Track Crypto Tax Evaders

The UK's tax office is going on the offensive against crypto tax evaders and virtual currency fraudsters with a new piece of technology.
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Her Majesty’s Revenue and Customs (HMRC), the UK’s tax agency has opened a contract to procure a crypto-asset and blockchain analysis software. The HMRC has plans to use this software in its campaign to combat crypto tax evasion starting February 2020.

British Tax Office Taking the Fight to Crypto Tax Evaders

According to news outlet TheNews, the UK’s tax office is doubling down on crypto tax evaders starting February 2020. The HMRC is searching for a provider of a crypto-asset and blockchain analysis software to track bitcoin (BTC) and other crypto transactions.

The tax agency recently opened a $130,000 (£100,000) licensing contract to acquire an analysis software to monitor and trace crypto transactions.

According to a statement from the HMRC, the tax office recognizes the payment options made available by crypto as well as its use by cybercriminals for tax evasion and money laundering.

 An excerpt from the statement reads:

“Crypto-assets, such as Bitcoin and Ethereum, provide a means to transfer value between interacting parties. These services are increasingly used for a range of purposes, from international money transfers, sales of digital services, paying staff and tax evasion and money laundering.”

The HMRC also specified that suppliers offering software capable of tracking privacy-focused digital currencies such as Dash, Zcash, and Monero, will be preferred.

Interested suppliers and providers can begin sending in their applications by Monday (January 27, 2020).

A deadline of Friday (January 31, 2020) has been set as the HMRC plans for the contract to officially start by Monday (February 17, 2020).

HMRC Wants to Track Crypto Fraudsters

The tax office stated that its decision to go after a commercial product stems from the inability of free online tools and human analysis to accurately track crypto transactions and value fluctuations in cryptocurrencies.

The tax office remarked that:

“Many of these crypto-asset transactions are recorded publicly in a ledger known as a blockchain. Whilst the transactions are typically public, the participants undertaking them are not.”

The HMRC is looking to equip its Fraud Investigation Service (FIS) and Digital Support and Innovation (DSI) departments with crypto tracking software to bridge the intelligence gap and shed light on how crypto trading is currently supporting criminal activity.

The tax office believes its FIS-DSI teams will achieve more if equipped with crypto tracking software capable of cluster analysis. With this, the tax office will be able to attribute transactions to crypto firms providing cryptocurrency mixing scams and running dark-web operations.

The Tax agency said:

“We are seeking the provision of a tool that will support intelligence-gathering methods to identify and cluster crypto-asset transactions into linked transactions and identify those linked to crypto-asset service providers.”

According to the HMRC, the supplier will be chosen based on their capability and expertise in the crypto-asset tracing field. The tax agency also said the service provider must have relevant people and suitable assets.

Back in December 2018, the HMRC released a detailed document detailing how crypto tax would be imposed on investors. The tax agency said the document serves as a continuation of previous reports from the government concerning crypto tax and virtual assets.

Tax Authorities Keen on Compliance

Britains’ HMRC is the latest tax authority to step up its game against the growing problem of crypto tax evaders and crypto-related cybercrimes.

There have also been reports of individuals receiving prison sentences for acts of crypto money laundering as well as investigative firms closely monitoring fraudulent transactions.

Blockonomi previously reported that the U.S Internal Revenue Service (IRS) published crypto taxation guidelines back in October 2019. The IRS said the new laws were aimed at hammering down on crypto tax evaders.

In April 2019, a 33-year-old Danish hacker was reported to have received a four-year prison sentence for bitcoin money laundering and the hacking of private digital asset services.

The arrest of a suspected crypto money launderer was reported back in April 2019. The suspect was allegedly mining crypto cryptocurrency and using it to fund drug operations.

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Osato is a Bitcoin enthusiast who can often be found providing insight on the latest Bitcoin-related news. When he isn't closely monitoring stories in the industry, he is either attempting to beat his scrabble high score or internally debating some existential dilemma. Contact

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