The Biden administration’s efforts to secure emergency funding for the Treasury Department’s sanctions efforts were met in full — except for one. Republicans balked at the request to infuse the IRS investigations unit (IRS-CI) with $30 million, according to people involved in the negotiations. The objection was tied to concern over the agency, which sits under the Treasury umbrella, diverting focus from its core mission.
But it underscored long-standing wariness from GOP lawmakers about boosting the agency’s enforcement funding, and general Republican opposition to significant funding boosts for the IRS.
That hasn’t stopped the agency’s efforts to plead their case, with officials lobbying lawmakers for more resources in recent weeks and circulating a report on Capitol Hill underscoring what they say is an acute need for additional funding in order to carry out their new sanctions responsibilities, according to two congressional aides with knowledge of the matter.
While the IRS investigations unit spends the vast majority of its time and resources on tax-related investigations, its agents also pursue pure narcotics and high-level money laundering, terrorist financing and national security related matters. Its 2,100 agents are known within the federal enforcement apparatus as specialists when it comes to tracking and investigating complicated money flows.
But whenever new priorities are identified for the agency, like the growing focus on digital assets or sanctioned Russian oligarchs, the agency must reallocate agents and resources from elsewhere, which could slow or hinder other investigations, according to the agency’s chief, Jim Lee.
“Something will suffer,” he told CNN.
In a statement to CNN, an IRS spokesperson argued that the investigations unit and the IRS writ large need more “stable, long-term funding.”
“Underfunding leaves the IRS with impossible decisions across the agency that lead us to rob one essential function to fund another,” the spokesperson said.
“We need sustained funding over 10 years to really be strategic about how we address the threats that are out there today,” he said.
What the funding would have paid for
The $30 million the administration sought to bolster the IRS’ investigations unit would have increased the number of licenses for a records database that helps agents trace assets around the world from five to 60, fund the training and hiring of more agents to focus on sanctions work and provide more funds for third-party resources and contractors that supplement agents’ investigative work, an IRS official told CNN.
“With all of these, their primary purpose is to continue their way of life, their luxury lifestyle. I mean, whether that’s, you know, purchasing the yachts, the expensive cars, the million-dollar homes, the billions that they have in assets. It’s our job to kind of stay in front of that and unravel those complex activities,” Jarod Koopman, executive director of Cyber and Forensic Services at IRS-CI, told CNN.
But despite its shrinking size, the agency’s responsibilities have continued to grow beyond holding American tax cheats or financial criminals accountable. Agents for the unit have undertaken illicit money laundering investigations against Russian oligarchs since 2017, and more recently they have substantially grown the number of investigations into cryptocurrency transactions or other digital assets involving Russian-based entities through a project called “Sanctions Evaders.”
“How seriously are we really taking the sanctions problem if you’re not properly funding the one agency that can really provide the muscle and horsepower and the experience in financial crimes and following complex money flows?” Don Fort, a former chief of the IRS criminal investigations unit who worked for the agency for nearly 30 years, told CNN.
Fort said that the lack of funding over the years “unfortunately” means the agency has “been forced to become very resourceful” and that it would be hard to precisely measure the impact of not receiving the $30 million funding request, but added that this is a disappointing development and he believes the funds would have significantly aided the US Government’s efforts to enforce sanctions.
“It’s hard to quantify exactly, but they will look no doubt to see what other opportunities exist,” he told CNN. “They’re resilient.”
The road ahead: Sanctions enforcement
As pressure mounts from American lawmakers and the Ukrainians for the US to further isolate the Kremlin and its cronies, US officials have stressed the importance of enforcing the raft of sanctions that have been rapidly imposed since Russia invaded Ukraine. The US and its allies have frozen a large swath of the Russian central bank’s foreign currency reserves, cut off certain Russian firms from US technology like semiconductors, and disconnected certain Russian banks from the global bank messaging system, known as SWIFT.
“In the period ahead, Russia’s main focus from an economic perspective is going to be to figure out how they can get around, over or under the sanctions that have been imposed. And blocking off those pathways is going to be vital to producing the kinds of cost imposition effects and vital to shaping the thinking in the Kremlin,” said White House national security adviser Jake Sullivan on Friday.
Stuart Levey, who served as under secretary for terrorism and financial intelligence at the US Treasury under Presidents George W. Bush and Barack Obama, said that tracking the assets of wealthy Russians sanctioned by the US and its allies is going to be a global effort that poses “very complex” financial investigative challenges.
“One can already see from what’s in the public domain that these are very sophisticated financial actors who have had access to financial advice and it will require equally sophisticated forensic work to unwind and identify the sort of assets that we’re talking about here,” he told CNN.
US ramps up sanctions
The new sanctions target 328 members of the 450-seat Russian State Duma, the lower level of the two-tiered Russian Parliament, cut off 48 Russian defense and materiel companies from Western technology and financing. Herman Gref — the head of Sberbank. who has worked with Putin since the 1990s when both men were in the mayor’s office of St. Petersburg — was also sanctioned.
Long-time Putin associate Gennady Timchenko — his companies, family members and yacht — have also been sanctioned, as well as 17 board members of Russian financial institution Sovcombank, according to the White House.
Treasury sanctioned 12 members of the Duma earlier this month for their calls to recognize the Russian-backed separatist regions in Eastern Ukraine, which precipitated Russia’s invasion. Thursday’s measures will also sanction the State Duma as an institution, according to the Treasury.
“The Russian State Duma continues to support Putin’s invasion, stifle the free flow of information, and infringe on the basic rights of the citizens of Russia. We call on those closest to Putin to cease and condemn this cold-blooded war,” Treasury Secretary Janet Yellen said in a written statement.
CNN’s Phil Mattingly contributed to this report.
