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South Dakota is one of the places where “dirty money” is hidden.

South Dakota is one of the places where "dirty money" is hidden.

  • South Dakota — one of the country’s least populous states — has in recent years become “the leading tax haven, hiding billions of dollars tied to those accused of serious financial crimes,” according to the Washington Post and the International Consortium of Investigative Journalists.
  • Documents indicate that the state has become a competitor to traditional tax havens such as Jersey and the Caribbean
  • Pandora’s Papers is an investigation with more than 600 journalists from 117 countries. A lot of information was revealed about assets and transactions, including Tony Blair, Shakira, Andrei Babis, Volodymyr Zelensky
  • More similar information can be found on Onet homepage

The state’s allure lies not in its protection from taxes—though South Dakota does not have a state income tax or capital gains tax, but in its regulations to conceal the true owners of assets invested there, protecting them from civil lawsuits by creditors or family members . All using so-called trusts – legal structures traditionally used to pass on inheritances to children. Those who are able to enjoy exceptional legal protection. As the magazine wrote, this is the result of complex state laws, often written by lobbyists and enacted by lawmakers who often do not understand them themselves.

How does the so-called trusts?

As a result, the amount of money “parked” in South Dakota trusts has quadrupled to $360 billion in recent years, tempting the wealthy to relocate their fortunes from “traditional” tax havens like the Bahamas. At the same time, it is not the only country that has an interesting offer for those interested in the anonymous protection of their money. Similar provisions exist in, inter alia, Nevada, Delaware and New Hampshire.

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Although companies that offer products such as trusts — like banks — are required by law to verify that the money they receive is not derived from crime, according to The Washington Post, in practice this process is not strictly regulated.

Moreover, several South Dakota trust holders have mentioned the Pandora Papers, including the incumbent president of Ecuador, Guillermo Laso, and former Dominican Republic vice president, Carlos Morales Troncoso—accusing financial crimes and human rights abuses.

US measures to hide assets

Although the US has taken measures at the central level to make it more difficult to hide assets – for example, force disclosure of the true owners of anonymous bush companies – these regulations have not yet come into effect. It also does not apply to the trusts themselves, although such regulations may be adopted next year. However, much is due to enforcement of the regulations, which has so far been underfunded by FinCEN, the main law enforcement agency.

– President Biden declared this year that corruption is a threat to national security and he is absolutely right, because along with dirty money there are “dirty” effects in our country – Paul Massaro, adviser to the Helsinki Anti-Corruption Commission, told PAP. – I have the impression that after decades of neglect we are making a mental leap in this matter. He added that there is still a lot of work ahead of us to continue this fight in earnest.

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Pandora leaves. international investigation

Pandora’s Papers is an investigation with more than 600 journalists from 117 countries. This includes 12 million documents on wealth hiding, tax evasion and even money laundering by global influencers.

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