Alternate cause – US shell companies make enforcement impossible

It was the first time that FinCEN—ever, in its 30-year history—had busted a trust company for violating money-­laundering­ prevention laws. And its investigation spotlighted not just the lapses of Kingdom Trust but an entire system that helps kleptocrats (who have looted their countries for private gain) and wealthy Westerners alike anonymously route their money through the US economy. It’s a system that’s evolved over decades—a race to the bottom led by states desperate to ensure a steady flow of revenue. It involves a sprawling network of trust companies, law firms, and real estate agencies that facilitate the transfer of suspect money. And it’s made the United States one of the world capitals of kleptocratic cash.

Today, there’s no need to stash your money in the Bahamas, Malta, or the Caymans when you can keep it in places like Sioux Falls, South Dakota. Thanks to favorable laws that make it an ideal refuge for the world’s wealth, America now sits at the center of the global offshore economy—an international pot of riches even larger than the GDP of China, by some estimates.

Journalistic investigations like the Panama Papers and Pandora Papers have helped expose the scourge of shell companies that are the linchpins of these offshore networks. Such corporate formations—which provide anonymity to the people behind them and are largely impenetrable to authorities trying to track the money—are not unique to the United States. Other Western democracies, including the United Kingdom, have also allowed them to flourish. But the US has gone far beyond most other countries in the level of secrecy that it provides, and it has done so at a far greater clip than any of its peers.