State trusts sling the US into first place for financial crimes
SOUTH DAKOTA
The last 15 years or so have witnessed a gradual migration of money out of traditional tax havens — Switzerland, the Bahamas, etc. — and into the United States, thanks to the difficulty of opening anonymous bank accounts these days. The short explanation for this is that the U.S. imposed rules on other countries, then refused to impose the same rules on itself (which is all part of a general, low-level hypocrisy in anti-money laundering policy from bigger countries, which smaller countries are furious about). The long version you can read in this article I wrote a while ago.
People who campaign against tax dodging, kleptocracy and financial crime have been concerned about this for a while, and it is notable that the Tax Justice Network now puts the U.S. in first place in its Financial Secrecy Index — way, way, way ahead of Switzerland and Singapore, which are tied in second.
Much of the attraction of the United States as a wealth haven for rich foreigners has been the trusts on offer in states like South Dakota, which can now provide a level of protection and secrecy unrivaled in any of the places we traditionally think of as tax havens. Since there are no state taxes on wealth, and no statute of perpetuities, money placed in trust in South Dakota can stay there forever, compounding indefinitely, without anyone else knowing who benefits from it. As of the end of last year, assets worth $607.5 billion had been placed with the state’s trust companies, up from $500.6 billion a year earlier and from just $57.5 billion in 2009.
South Dakota itself has a population of less than 900,000 people and little ability to monitor or regulate the wealth pouring into its trust companies’ coffers. Its division of banking only checks its trust companies every three years and — anti-corruption activists warn — that’s not good enough.