Global Financial Crimes Organization Releases Guide on NFTs

Erlon Silva - TRI Digital/Getty Images

The report, issued by the Joint Chiefs of Global Tax Enforcement, intends to help guide public and private entities when participating in the growing NFT market. 

An international coalition dedicated to policing global tax evasion and related cyber financial crimes issued a new advisory warning financial institutions of the inherent dangers of engaging in commercial transactions with Non-fungible Tokens, or NFTs. 

The Joint Chiefs of Global Tax Enforcement—a group consisting of law enforcement from the U.S., Australia, Canada, the U.K. and France—released a new document on Thursday called “J5 NFT Marketplace Red Flag Indicators,” which lists concerns for civilians and banks alike surrounding the sale and acquisition of NFTs. 

NFTs gained traction as a digital asset similar to cryptocurrency. They can take the form of music, art, drawings or other digital mediums. 

“This space is changing so fast and technologies and products have the ability to become the ‘next big thing’ without any due diligence or regulation on the part of the creator of the product,” said Special Agent Oleg Pobereyko, the Crypto Group Lead within the J5. “We tried to put together a product that would help keep people safe while law enforcement catches up to these particular concerns.”

Moving forward, the J5 collective intends to give financial institutions and civilians public guidance when participating in the burgeoning NFT marketplace. The guidance is aimed at preventing forms of fraud associated with purchasing and selling NFTs. 

“I hope this is the first of several of these intelligence bulletins the J5 puts out,” said Jim Lee, the IRS Criminal Investigation Chief. “We are doing incredibly innovative things in the J5 and the lessons we  are learning are cutting edge. Sharing that information with the public and private sectors can only help to stop various types of fraud before they become the next case on our investigative  inventory.” 

As is the case with cryptocurrency, money laundering and tax or sanction evasion are some of the paramount concerns surrounding NFTs. Next month, J5 representatives will convene in London for a series of meetings to collectively find tax evaders using data analytics. 

“Cryptocurrency is growing in popularity in Australia, with many choosing to invest as part of their  portfolio,” said Australian Taxation Office Deputy Commissioner Will Day. “This paper provides a suite of indicators that financial institutions can reference to help them identify illicit financial activity concerning NFTs. This report is a unique and progressive initiative and the J5 looks forward to working closer with the virtual assets industry to meet the rapidly evolving and highly complex environment which we share.” 

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