A new audit from the Office of the Inspector General reveals the U.S. Marshals Service could improve its seized crypto management with new procedures and policies.
While the United States Marshals Service effectively safeguards federally-seized digital currencies, a new audit suggests that the law enforcement agency needs to take additional steps to properly track and organize its cryptocurrency assets through improved inventory management.
Published in an audit of the USMS’s cryptocurrency seizure practices, the findings focused on the agency’s usage of tangential spreadsheets used to document digital currency inventories. The audit noted that this approach is inefficient in reporting accuracy and poses a risk to accurate accounting of the total value of cryptocurrencies seized by federal officials.
“The USMS serves as the primary custodian for the DOJ’s seized assets and, as of June 2021, managed nearly 200 DOJ cryptocurrency seizures,” the report notes. “However, the USMS faces challenges in managing and tracking cryptocurrency in the U.S. Department of Justice’s official seized asset tracking system.”
Without a standardized set of regulations and procedures for cataloging and valuing the amount of digital assets in federal custody, the USMS is further hindered from building out any other cryptocurrency services, such as government contracts to outsource managing responsibilities.
“The USMS should establish seized cryptocurrency policies and procedures related to inventory management, asset storage, quantification, valuation and disposal prior to handing over its seized cryptocurrency responsibilities to a contractor,” the audit reads.
Current estimates report that the USMS has a total of $466 million worth of cryptocurrency seized by the Department of Justice in its care, as of September 2021. Officials rely on Justice’s CATS asset cataloging system to manage its digital currencies
Overall, the USMS does an “adequate” job of chronicling and storing cryptocurrencies. But the legacy CATS system is designed to manually determine the assets’ cryptocurrency information, which can make data on digital assets in federal possession inconsistent due to human error.
Moreover, the USMS is lacking supplementary policies and procedures to guide the database management of cryptocurrency inventories, resulting in errors and other irregularities within the CATS system. The lack of property cataloging can risk errors in reporting and future federal sales of assets.
“We recommend the USMS develop and implement policies and procedures to handle cryptocurrency forks that occur for an asset in custody, to include assigning a unique CATS identification number to the new asset,” the report says.
This report follows recent federal auctions of cryptocurrencies and other digital assets attained by the U.S. government through seizure, donations and other means. The General Services Administration auctioned its latest batch last week, valued at over $268,000.