U.S. Was Just Named No. 2 Facilitator Of Illicit Global Funds

By Pam Martens and Russ Martens of Wall Street on Parade

Yesterday we reported that the Chairman of the Securities and Exchange Commission, Jay Clayton – the man ostensibly in charge of providing financial transparency to the American people – has tens of millions of dollars in family net worth tied to a Delaware company specializing in providing secrecy to corporate entities. (This actually makes sense for an administration packed with billionaires with lots of tax haven accounts.)

On the heels of that confidence-draining news comes the Financial Secrecy Index for 2018 which names the United States the 2nd worst country for facilitating financial secrecy and illicit money flows, just behind Switzerland. The accompanying report from the Tax Justice Network on the U.S. specifically calls out the state of Delaware, noting the following:

“The U.S. provides a wide array of secrecy and tax-free facilities for non-residents, both at a Federal level and at the level of individual states. Many of the main Federal-level facilities were originally crafted with official tolerance or approval, in some cases to help with the U.S. balance of payments difficulties during the Vietnam War; however some facilities – such as tolerance by states like Delaware or Nevada of highly secretive anonymous shell companies – are more the fruit of a race to the bottom between individual states on standards of disclosure and transparency.”

The report includes an eye-opening memo from 1966 that was “passed by a former State Department operative to a Chase Manhattan bank staffer.” It reads:

“The US is probably the second major flight money center in the world, but with little probability of rivalling Switzerland for the foreseeable future. Like Switzerland, flight money probably flows to the US from every country in the world. . . however this is insignificant relative to the total potentially available. . . US-based and US-controlled entities are badly penalized in competing for flight money with the Swiss or other foreign flight money centers over the long run.”

The memo went on to explain why the U.S. was losing ground to Switzerland for illicit money flows:

“the ability of the US Treasury, Justice Department, CIA and FBI to subpoena client records, attach client accounts, and force testimony from US officers of US-controlled entities . . . restrictive US investment and brokerage regulations and policies, which limit the flexibility and secrecy of investment activity . . the US estate tax and US withholding tax on foreign investments…”

With captured Federal regulators overseeing the largest Wall Street banks that facilitate money laundering and getting slaps on the wrist for failures to report it, it’s easy to see how the U.S. caught up with Switzerland. (See Trump’s Justice Department Goes Easy on Citigroup Unit for Criminal Money Laundering and JPMorgan and Madoff Were Facilitating Nesting Dolls-Style Frauds Within Frauds.)

A key milestone in the United States’ march toward becoming a major financial secrecy haven was, according to the report, the International Banking Facility mechanism that was introduced in 1981. “This,” notes the report, “allowed banks in the U.S.A., which had previously needed to go offshore (particularly to London) to get around domestic financial regulations, to keep a separate set of books that effectively allowed them to obtain these exemptions while remaining at home. This attracted still more funds out of foreign tax havens and marked a further step offshore for the United States.”


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