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US ranked as the first country to hide money illegally

The United States is the num­ber one des­ti­na­tion for hid­ing mon­ey ille­gal­ly, accord­ing to a new report from a tax advo­ca­cy group.

This year marks the first time the United States has ranked first on the FACT Coalition’s Financial Secrecy Index, the Washington-based orga­ni­za­tion said Tuesday. The United States ranked above tra­di­tion­al tax havens Singapore, Switzerland and Luxembourg, which round out the top four nations. The Cayman Islands, which many Americans asso­ciate with off­shore bank accounts, ranks 14th on the group’s list.

America often says ‘We’re #1’ but that’s some­thing we don’t want to be #1 at,” said Ian Gary, exec­u­tive direc­tor of FACT Coalition.

The find­ings come as the United States cracks down on the wealth of Russian oli­garchs after Russia invad­ed Ukraine. The United States has imposed finan­cial sanc­tions on some oli­garchs, includ­ing bil­lion­aires Alisher Usmanov and Igor Shuvalov, but this task has been made more dif­fi­cult by the fact that much of this wealth is hid­den in a com­plex net­work of assets. real estate, pri­vate invest­ment accounts and anony­mous. shell com­pa­nies, Quartz reported.

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

The FACT coali­tion exam­ined the finan­cial rules of around 100 coun­tries, includ­ing laws that make it eas­i­er for crim­i­nals to hide and laun­der mon­ey. Experts say the main rea­son the United States topped the list is the Treasury Department’s lack of fund­ing to enforce a new anti-mon­ey laun­der­ing law.

In December 2020, Congress passed the Corporate Transparency Act, which requires any­one who forms a shell com­pa­ny in the United States to list the name of an own­er. Under the law, the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, is respon­si­ble for enforc­ing the rules.

But experts said FinCEN needs addi­tion­al funds, staff and tech­nol­o­gy to take on this new task and inves­ti­gate who is ille­gal­ly hid­ing mon­ey. Biden admin­is­tra­tion offi­cials are ask­ing Congress to send $210 mil­lion to FinCEN as part of the US government’s pro­posed bud­get for 2023, which rep­re­sents an increase of about 30% over its cur­rent funding.

Stricter laws needed

FACT has con­clud­ed that almost all devel­oped coun­tries should adopt stricter finan­cial laws, espe­cial­ly regard­ing the own­er­ship of shell com­pa­nies. Failure to do so allows ter­ror groups to covert­ly fund their oper­a­tions and oli­garchs to evade tax­es, coali­tion offi­cials said.

It’s unclear how much mon­ey is ille­gal­ly hid­den with­in US bor­ders, accord­ing to anti-mon­ey laun­der­ing experts. But the US Treasury Department pre­vi­ous­ly pegged the fig­ure at around 2% of nation­al GDP, which today stands at $480 billion.

US offi­cials have long been aware of mon­ey laun­der­ing activ­i­ties in the United States. 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 front com­pa­ny in the United States than to get a library card, said Lakshmi Kumar, a ter­ror­ist financ­ing expert at Washington think tank Global Financial Integrity. This is because an appli­cant must ver­i­fy their iden­ti­ty to use the library, but a shell com­pa­ny does not, he said.

Christopher J. Brooks

Khristopher J. Brooks is a reporter for TUSEN MoneyWatch and cov­ers busi­ness, con­sumer and finan­cial sto­ries rang­ing from eco­nom­ic inequal­i­ty and hous­ing issues to bank­rupt­cies and sports affairs.

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