The US is now the best country for illegally hiding money, findings report

The US is the top destination for illegally depositing money, according to a new report from a pro-tax advocacy group.

This year marks the first time the US has ranked No. 1 on the FACT Coalition’s Financial Secrecy Index, the DC-based organization said Tuesday. The US outperformed the traditional tax havens of Singapore, Switzerland and Luxembourg, which rounded out the top four. The Cayman Islands, which many Americans associate with offshore bank accounts, are number 14 on the group’s list.

“The US often says ‘We’re number 1’, but this is something we don’t want to be number 1 in,” said Ian Gary, executive director of FACT Coalition.

The findings come as the US cracks down on the Russian oligarch’s wealth after Russia’s invasion of Ukraine† The US has financial sanctions some oligarchs, including billionaires Alisher Usmanov and Igor Shuvalov, but that task has been complicated by the fact that much of that wealth is hidden in an intricate web of real estate assets, private investment accounts and anonymous shell companies, Quartz reported.

The Justice Department has set up a new KleptoCapture task force specifically aimed at finding hidden Russian wealth.

The FACT coalition examined financial regulations from about 100 countries, including laws that make it easier for criminals to hide and launder money. The main reason the US has jumped to the top of the list, according to experts: a lack of funding for the Treasury Department to enforce a new anti-money laundering law.

In December 2020, Congress passed the Corporate Transparency Act, which: requires anyone forming a shell company in the US to list an owner’s name. By law, the Ministry of Finance’s Financial Crimes Enforcement Network, or FinCEN, is responsible for enforcing the rules.

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But experts said FinCEN will need additional funding, staff and technology to take on this new task and investigate who is hiding illegal funds. Biden administration officials are asking Congress to send $210 million to FinCEN under the US government’s proposed budget for 2023, representing an increase of about 30% over current funding.

Stricter laws needed

FACT concluded that almost every developed country should adopt stricter financial laws, especially around shell company ownership. By failing to do so, terrorist groups could secretly fund their operations and oligarchs could evade taxes, coalition officials said.

It’s unclear how much money is being illegally stashed within US borders, anti-money laundering experts say. But the US Treasury Department previously pegged the figure at around 2% of the country’s GDP, which would be $480 billion today.

US officials have long been aware of money laundering activities in the US. More recently, Treasury Secretary Janet Yellen said in December that “the best place to hide and launder ill-gotten gains is actually the United States.”

It takes less effort to set up a shell company in the US than to get a library card, said Lakshmi Kumar, a terrorist financing expert at Washington think tank Global Financial Integrity. That’s because an applicant must verify their identification to use the library, but that’s not the case for a shell company, he said.

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