The U.S. Postal Service (USPS) Inspector General (IG) reported that the Postal Inspection Service sufficiently manages seized cryptocurrency. However, opportunities exist to improve its management of cryptocurrency used for investigative purposes.
The IG’s objective was to evaluate the effectiveness of U.S. Postal Inspection Service policies and procedures for managing cryptocurrency in its law enforcement activities. The anonymity of cryptocurrency transactions and the instability of the value allow for illicit actions when used during law enforcement activities. In 2017, the Postal Inspection Service established the Cryptocurrency Fund Program to establish standards and policies to account for cryptocurrency transactions and reduce operational risk.
During this audit, the IG inspected the agency’s use and seizure of cryptocurrency in cases closed in fiscal years 2019 and 2020. Overall, the IG found the agency has managed to seize cryptocurrency by recording seized assets and collecting sales proceeds.
But the IG also found that there are areas where the agency could improve. The IG reported that it found inaccuracies in the agency’s data in the Transaction Review Report, which shows cryptocurrency transactions associated with a particular case. The data integrity issues affect the accuracy of the Transaction Review Report. It cannot be used to track and manage cryptocurrency transactions effectively or to validate the final balance of funds for individual cases.
The IG also found that the Postal Inspection Service does not have a comprehensive cryptocurrency training program for postal inspectors. According to the audit, postal inspectors must be approved to conduct undercover operations, and training must be completed prior to requesting cryptocurrency funds. However, there is no specification on what training courses should be taken or how frequently refresher training is required.
As a result of the lack of standardized training, the IG found that two of the nine cases were only opened to support on-the-job cryptocurrency training. And without a comprehensive training program, the Postal Inspection Service is at increased risk while using cryptocurrency to support investigations.
Finally, the IG found that the Postal Inspection Service cryptocurrency guidance does not include documented procedures related to the process for purchasing cryptocurrency for the national wallet, which stores the Cryptocurrency Fund Program’s cryptocurrency, the amount of cryptocurrency that should be maintained in the national wallet, how to reconcile transactions, or how to conduct an annual review of the account. Providing specific guidance ensures the agency retains organizational knowledge, meets operational needs, and minimizes risk.
The IG made four recommendations to the Postal Inspection Service:
- Ensure that the Cryptocurrency Fund Program has the information needed to provide oversight of the investigative use of cryptocurrency.
- Ensure duplicate data and unrelated transactions are not included in the Transaction Review Report and that the report provides sufficient information to differentiate between transactions.
- Develop a comprehensive cryptocurrency training program.
- Develop written procedures for the management and oversight of the national wallet and its associated exchange account.