Sunday Reading: South Dakota—The World’s New Tax Haven?

Earlier this year President Joe Biden promised to make an international effort to clean up the dirtiest corners of the world financial system. It turns out he may have to start in the American Midwest.

The Washington Post revealed the extent of American hypocrisy this week when the newspaper published the results of a year-long investigation into more than 11 million confidential documents called “The Pandora Papers.” The records, leaked by financial institutions around the world, show foreign politicians, business tycoons and billionaires “moving money and other assets from long-established tax havens to US trust companies.”

The story begins seven years ago in South Dakota, where “a little-known financial company” [Trident Trust] … Invited the world’s elite. ”Those who answered the call included people“ charged with fraud, bribery or human rights abuses in some of the world’s most vulnerable communities, ”the story says.

In the following paragraphs, the authors describe the heartbreaking crimes of some of Trident’s best-known customers – a Colombian textile tycoon, an orange juice mogul, and (indirectly) a sugar maker in the Dominican Republic.

Although there is no evidence in the Pandora Papers that these individuals were hiding money from criminal activity, “it has become perfectly clear that our national interests really depend on keeping that type of money out,” said Josh Rudolph, a member the National Security Council Staff in the Obama and Trump administrations told the Post.

“We strengthen thugs and crooks, do not uphold our values ​​and stir up popular resentment against America.”

The Post also describes how citizens of the United States have benefited from the country’s flexible and discreet trust laws. In the middle of the story, a father recalls his unsuccessful struggle for child support from his ex-wife, whose money was held in trust by Trident.

In America’s decade-long race to relax financial regulations, South Dakota emerged as the clear winner with 81 trusts hosting more than $ 360 billion. But Florida, Delaware, Texas, and Nevada are also among the country’s worst culprits, with a series of relaxed laws that helped America overtake Switzerland in a ranking of countries “most complicit, individuals.” to help hide their finances from the rule of law ”. . “

The Post describes how the trust industry began to expand in the 1980s and 90s, when state lawmakers took the opportunity to enact more permissive financial regulations, in part to stimulate the local economy. The authors go on to describe how trusts “can be complex legal instruments with a limited paper path and strict confidentiality rules” that are subject to limited oversight and few state or federal regulations.

It may surprise some Americans that our country is as guilty as the Cayman Islands when it comes to hiding the money that is claimed by the one percent. But the concise reporting of the Post leaves no doubt. Perhaps after reading the multitude of Pandora Paper stories, we are more ready to question the “shining city on a hill” narrative.

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Follow the Staff Writer Jasmine Gallup on Twitter or send an email to jgallup@indyweek.com.