For years, Viktor Bout, known as the 鈥淢erchant of Death,鈥� was considered the world鈥檚 premier arms dealer, with clients ranging from those in Muammar Qaddafi鈥檚 Libya to those in Mobutu Sese Seko鈥檚 Democratic Republic of the Congo. Former Ukrainian Prime Minister Pavlo Lazarenko, meanwhile, landed upon Transparency International鈥檚 listing of the world鈥檚 ten most egregious kleptocrats. And Teodoro Nguema Obiang Mangue, son of Equatorial Guinea鈥檚 dictator鈥攁 leader who has remained ensconced in power since 1979鈥攊s known not only for forfeiting tens of millions of dollars to the U.S. Department of Justice, but also for the fact that he continues to own, of all things, Michael Jackson鈥檚 crystal-studded glove.
Despite their disparate vehicles for accumulating wealth, and despite their current fortunes鈥擝out remains behind bars, while Obiang is now Equatorial Guinea鈥檚 vice president鈥攁ll three had something in common. According to investigations and court records alike, all three men saw fit to utilize American shell companies to funnel and obscure their massive wealth. Rather than squirrel their funds in traditional offshore havens, the three turned to the United States to blur their swelling finances鈥攁nd to further their own kleptocratic, or lethal, pursuits.
Bout, Lazarenko, and Obiang are by no means the only nefarious non-American actors utilizing U.S. shell companies to conceal their finances over the past few years. From Moldovan gangs involved in human trafficking to Mexican cartels funneling funds into the United States, even extending to criminals diverting millions of dollars that had been intended to upgrade safety precautions at Soviet-era nuclear facilities, the cast of characters abusing America鈥檚 system of anonymous companies鈥攁nd of the country鈥檚 overall transformation into a leading provider of shell companies鈥攊s as deep as it is sinister. Not only was one of the U.S. companies allegedly linked to Bout used for arms transfers to the Taliban, but, as one lawyer specializing in shell companies wrote in 2017, 鈥淚t鈥檚 not entirely beyond the realms of possibility that ISIS could be operating companies and trust funds domiciled in Delaware.鈥�
All told, over the past few years the United States has transitioned into one of the most prominent jurisdictions hawking outright financial secrecy internationally. While traditional tax havens and other Western governments alike have tightened regulations pertaining to financial transparency, the United States has instead lurched in the opposite direction. And America鈥檚 transformation into a haven for financial anonymity has arisen in no small part due to the efforts of a handful of local, state-level governments. Led by Delaware, Nevada, Wyoming, and South Dakota, a small scattering of states has flipped the broader American theory of federalization鈥攖hat is, state-level legislative experimentation in the pursuit of policies that work best鈥� on its head, and perfected policies that have placed the United States at the top of the list of global offshore havens. When it comes to financial secrecy, these states are engaged, as the Tax Justice Network wrote, in a 鈥渞ace to the bottom.鈥�
While the Federal government has generally been regarded as one of the leading enforcers of international financial oversight, the United States has nevertheless morphed into one of the chief jurisdictions for those looking to hide their funds from governments and investigators alike. And while a few cases, like those of Bout and Obiang, have come to light, a report from Global Witness recently observed that such instances are 鈥渧ery likely just the tip of the iceberg.鈥�