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The “New Switzerland” Where Politicians and Celebs Are Stashing Their Money


You’ve probably heard the brouhaha about the “Panama Papers,” a massive data leak that shows how the world’s rich and famous hide money in offshore accounts.

According to the data, Vladimir Putin allegedly concealed a billion dollars through one of these schemes. And he’s far from alone. One hundred and forty politicians in more than 50 countries just had their secrets revealed.

Their assets are spread across 21 international tax havens. But the thing is… they all missed a much better scheme to hide illicit money.

I’m talking about a tax haven so good, the world’s wealthy are calling it “The New Switzerland.” And the best part is, you don’t even have to travel abroad to find it…

See, it turns out one of the best places for foreigners to stash their cash is right here in the USA.

Hard to Believe (Especially Right Now)

This may come as a surprise to many readers, particularly at a time when U.S. citizens are being hounded by the taxman. But I’ll explain.

In 2010, Congress passed the Foreign Account Tax Compliance Act. It requires financial firms to disclose foreign accounts held by U.S. citizens and report them to the IRS. Failure to comply will result in crushing penalties.

This seemed like such a good idea that the OECD – an international economic committee made up of 34 countries – decided to get in on the act. It drew up even stiffer guidelines called the Common Reporting Standard. The goal is to help other countries find people hiding money in overseas accounts.

Nearly 100 nations agreed to impose new disclosure requirements for bank accounts, trusts and other investments belonging to international customers. But there were some holdouts.

These “bad boys” include Bahrain, Nauru, Vanuatu… and the U.S.

A Bad Boy Who Ignores the Rules

That’s right. Uncle Sam is refusing to participate in the OECD’s global automatic information exchange for bank data and new rules about hiding money.

Why aren’t we agreeing to the OECD rules? It’s simple. Any proposals to do so are getting shredded by Republicans in Congress. (And when we say “Republicans,” we’re pretty much talking about banking industry lobbyists.)

Now, U.S. firms are not permitted to knowingly help overseas customers evade foreign taxes. And there are legitimate reasons why a company – or person – may want to set up an offshore account.

However, a controversial presentation given by a managing director at Rothschild & Co. – one of the world’s largest international banking firms – declared the U.S. the “biggest tax haven in the world.”

His two key points:

  1. The U.S. has a relaxed attitude toward enforcing other countries’ tax laws
  2. The U.S. offers more privacy than other countries.

At least $1.6 trillion in illicit funds are laundered through the global financial system each year (that’s according to a United Nations estimate).

And when it comes to how much wealth is hidden in offshore accounts, total, estimates vary. Economist Gabriel Zucman put it at $7.6 trillion. McKinsey estimated that it could be as high as $21 trillion.

And a lot of that cash could soon find a home on our shores. Indeed, CBS’ 60 Minutes reports, “The U.S. has become one of the most popular places for foreigners to hide dirty money.”

The Best Money Can Buy

A study by the Tax Justice Network found that the U.S. has surpassed Singapore, Luxembourg and the Cayman Islands as a haven for super-rich individuals and businesses trying to hide money.

Of course, once foreigners bring all that cash here, you may be asking just what they plan to do with it. Well, they’re buying up real estate, for one thing.

Part of the leaked “Panama Papers” shows that foreign money, funneled through shell corporations and offshore accounts, is pouring into Miami.

Cash-only deals are fueling the city’s luxury condo boom.

Out of all Miami-Dade home sales in 2015, 53% were cash deals. That’s double the national average. What’s more, according to the Miami Association of Realtors, 90% of new construction sales are also cash deals.

A Flood of Corrupt Chinese

Rich Chinese are really diving headfirst into America’s luxury market. And, interestingly, some of these individuals may in fact be criminals in their home countries…

China recently released a list of its top 100 financial fugitives. These are people who have skipped out of the country with illegal funds.

Approximately 40 of them are suspected to be in the U.S.


China even issued a “priority list” of officials wanted for corruption who it suspects of being in the U.S. And it handed U.S. officials an even larger list of 150 fugitives suspected of being on the lam in America.

Now guess how many times the U.S. has prosecuted a Chinese official suspected of corruption.

C’mon, guess.

The answer is zero. Or at least it was until federal prosecutors began legal proceedings against Qiao Jianjun…

Qiao is a former official of China’s state-run grain monopoly. He’s suspected of laundering $4.8 million in illicitly gained funds.

China has publicly praised Qiao’s indictment as a success. But he is still technically a free man… so who really gets the last laugh?

Fact is, corrupt Chinese hiding from their government have very little to fear from U.S. authorities. China lacks formal extradition treaties with us, Canada and Australia.

That’s one reason why the U.S. is such a top destination for foreigners.

It also helps that America provides a special path to citizenship for those who invest $500,000 or more. That’s fascinating in itself, because China allows its citizens to take only a max of $50,000 a year out of the country.

The fact that capital outflows from China hit $1 trillion last year shows that the country’s elite are finding ways to sneak their wealth past snoopy officials.

It’s estimated that China’s wealthiest individuals are hiding billions of dollars overseas. And with U.S. reporting agencies playing by their own rules, you can bet a lot of that wealth is finding its way here.

Two Types of Justice

Christian Kalin, chairman of Henley & Partners, sums it up well: “The U.S. is a black hole of information for other countries now. Financial information goes in to the U.S., but does not come out.”

Or, as the Tax Justice Network says: “The U.S. has been a pioneer in defending itself from foreign secrecy jurisdictions. It aggressively takes on the Swiss banking establishment and set up its technically quite strong Foreign Account Tax Compliance Act…

“But it provides little information in return to other countries, making it a formidable, harmful and irresponsible secrecy jurisdiction.”

In other words, the U.S. is merciless in ferreting out the hidden wealth of its own citizens. But it acts like a rogue bank for every corrupt foreign politician who wants to hide their wealth.

Just something to chew on as you file your federal return…

And if you still don’t understand the importance of tax-managing your investments, you may want to give Alex’s Monday column a second look.

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