Trump’s Backers Fling Open America’s Door to Money Launderers

The No. 1 country to stash illicit funds will become even more welcoming to criminals.

Despite the impression that money laundering mainly occurs in small, landlocked European states or islands covered in palm trees, in reality, the U.S. political and economic system is remarkably open for the practice. U.S. Treasury Secretary Janet Yellen said in December 2021 that “the best place to hide and launder ill-gotten gains is actually the United States,” and these words have been repeated by her and other Treasury Department officials in various forms ever since.

Conflict finance, drug trafficking, terrorism, kleptocracy, sanctions busting, and a host of other global ills are facilitated by money laundering in the United States. But despite former President Donald Trump’s pronounced “tough-on-crime” approach, other parts of the Republican Party platform, the conservative Heritage Foundation think tank’s “Project 2025” strategy document, and several of Trump’s so-called crypto bro backers have advocated disassembling crucial aspects of U.S. institutions aimed at anti-money laundering and countering terrorism finance (AML-CTF).

This would open the floodgates for even more dirty money and its associated crime to enter into the United States. Should these efforts succeed, the results for the nation and the international system would be disastrous.

Global criminal networks cannot survive for long without money laundering. Money laundering is simply the act of making dirty money appear clean—or at least, not so dirty that no one will deal with it.

Just as legal businesses require the easy flow of finance to operate and profit, so too do organized crime groups, which makes money laundering a vital component to their operations. Criminals need to hide their identities so that they can use and enjoy their ill-gotten gains without attracting attention. Overseas criminal suppliers and other enablers must be paid—often in local currencies—thereby requiring adroit cross-border shadow banking. And even great-power politics comes into play, with Chinese networks now considered the primary money launderers for a variety of crime cartels, including for illicit narcotics.

Money laundering is also important for violent acts of extremism. For example, before Hamas’s Oct. 7, 2023, attacks in Israel, it brought in more than $1 billion per year. While the largest portions came from local sources, such as import taxes, and via Iran and Qatar,

Israeli officials say that about $500 million came as money laundered from Hamas’s investments abroad, including in construction and mining. Meanwhile, Lebanese militant group Hezbollah has one of the most long-standing and extensive global money laundering networks in the history of terrorism, and major U.S. law enforcement operations are regularly undertaken across multiple continents to try to tamp down the group’s ability to move and use funds.

Much of the United States’ transformation into one of the world’s key offshore jurisdictions rests upon the ease with which anyone around the world could set up an anonymous shell company in the country. Because of the structure of the nation’s corporate formation industry, in which states, rather than the federal government, oversee the creation of companies—including shell companies—states such as Delaware, Nevada, and Wyoming have competed with one another to offer the most opaque tools.

This competition transformed the United States’ corporate formation sector into an effective black box, making it nearly impossible to trace the ultimate source of the funds involved and making U.S. shell companies the perfect tools for oligarchs, kleptocrats, narco-traffickers, and others looking to hide their wealth.

But it wasn’t just the shell companies that accelerated the U.S. transformation into an offshore haven. Decadeslong loopholes have allowed the U.S. real estate sector to provide anonymous purchases to anyone around the world, turning the industry into a massive sponge for illicit wealth. Similar loopholes, likewise, transformed the country’s multitrillion-dollar private investment sector—private equity, hedge funds, venture capital, and more—into dirty money laundromats targeted by everyone from Persian Gulf dictatorships to Russian oligarchs. All the while, U.S. lawyers escaped any anti-money laundering requirements whatsoever.

Thanks to the rampant secrecy provisions across these multiple sectors, we still have relatively little insight into the total scope of these networks. But the little that we do know paints a damning, devastating picture. From Venezuelan kleptocrats to Iranian officials, from post-Soviet oligarchs to African despots, a variety of bad actors have turned to the United States to help hide their wealth.

In the process, these regimes have continued looting their populaces, destabilizing countries and regions around the world, strengthening their own grip on power, and—in the case of places such as Russia and Iran—using their ill-gotten gains to demolish democratic opposition and directly threaten U.S. national security.