US Rises as Tax Haven

The world’s wealthiest individuals are increasingly choosing the United States as a destination to hide their riches. While traditional offshore tax havens like Bermuda and Switzerland may come to mind, the US has become the biggest enabler of financial secrecy in the world.

This is according to the Tax Justice Network‘s Financial Secrecy Index, which ranks countries based on their “complicity” in helping the super-rich conceal their finances. The US topped the rankings in the most recent index, surpassing notorious tax havens such as Switzerland and the Cayman Islands. Experts attribute this to the pro-anonymity loopholes that American states have introduced to attract foreign capital and grow their wealth management industries.

South Dakota

One specific state that has experienced a significant influx of wealth in recent years is South Dakota. Despite its small population size, the state has seen a massive increase in domestic and international capital flowing into its trusts. These trusts have become a favorite tool for cartel heads, oligarchs, and other individuals seeking to hide their wealth. Currently, South Dakota holds $600 billion in trust assets, a 21% year-on-year increase. If this growth continues, experts estimate that trust assets in the state could reach $1 trillion by 2030.

The rapid expansion of South Dakota’s trust industry can be attributed to favorable tax laws and deregulation. With no state income tax and the ability to hold trusts secretly, South Dakota has become an attractive destination for the super-rich. Furthermore, assets placed in trusts in the state can remain virtually untaxed indefinitely due to the abolition of the Rule Against Perpetuities in 1983. This change allowed for the creation of “dynasty trusts” that preserve wealth for generations. Over the years, the US wealth defense industry has successfully influenced South Dakota legislators to pass laws that make trusts highly appealing to the super-rich.

The deregulation trend quickly spread to other states following South Dakota’s lead. More than half of US states have weakened or repealed the Rule Against Perpetuities, allowing for the widespread use of dynasty trusts throughout the country. States like Alaska, Nevada, and Delaware have also enacted laws that promote anonymous shell companies, providing individuals with a means to anonymize their wealth and control their funds.

While trusts and shell companies are not the only vehicles used by the super-rich to evade taxes, they have contributed to the growing shadow financial system in the US. The International Consortium of Investigative Journalists (ICIJ) shed light on the use of trusts in the US to avoid tax through the release of the Pandora Papers in 2021. The investigation identified over 200 US-based trusts with total assets exceeding $1 billion. South Dakota alone had 81 of these trusts, more than any other state. Among the trust assets, nearly 30 were connected to individuals or companies accused of fraud, bribery, or human rights abuses.

Despite these revelations and the negative consequences of the growing trust industry, federal trust reform and improved transparency have been slow to materialize. The US has not adopted the Common Reporting Standards (CRS) like many other countries, which provide for automatic exchange of financial account information among participating nations. Instead, the US relies on its own system, the Foreign Account Tax Compliance Act (FATCA), which allows it to identify offshore assets held by US citizens. However, it does not provide the same level of transparency to other countries regarding international wealth stockpiled within its borders. While there are plans to introduce a new corporate formation database to identify individuals controlling shell companies in the US, further action is needed to address the US’s role as a center for offshore financial activities.


As traditional offshore tax havens face increasing scrutiny and transparency measures, the US has emerged as a favored destination for the super-rich seeking to hide their wealth. States like South Dakota have implemented pro-anonymity loopholes and favorable tax laws to attract foreign capital and grow their wealth management industries. However, this has come at a significant cost to the rest of the country and the world. Experts argue that federal trust reform and increased transparency are needed to curb the flow of hidden money into the US and prevent the shifting of tax burdens onto the general population. While some measures are being taken to address the issue, more needs to be done to ensure a fair and transparent financial system for all.