When the US targeted Russia’s oligarchs after the invasion of Ukraine, the trail of assets kept leading to our own backyard. Not only had our nation become a haven for shady foreign money, but we were also incubating a familiar class of yacht-owning, industry-dominating, resource-extracting billionaires. In the January + February 2024 issue of our magazine, we investigate the rise of American Oligarchy—and what it means for the rest of us. You can read all the pieces here.

For years, a small company headquartered in South Dakota toiled in one of the most boring niches imaginable. Specializing in servicing individual retirement accounts, Kingdom Trust acted as a so-called custodian for these IRAs, focused on maintaining slow, steady growth. But in the mid-2010s, the firm began soliciting a radically different group of clients—shadowy companies based in notorious offshore havens that were having trouble opening US accounts.

On the surface, there was nothing illegal about this strategic shift. But what drove Kingdom Trust (which now also goes by Choice) into the sights of federal regulators was its egregious lack of due diligence. It “had virtually no process to identify and report suspicious transactions,” Himamauli Das, acting director of the Treasury Department’s Financial Crimes Enforcement Network, announced last spring.

It was the first time that FinCEN—ever, in its 30-year history—had busted a trust company for violating money-­laundering­ prevention laws. And its investigation spotlighted not just the lapses of Kingdom Trust but an entire system that helps kleptocrats (who have looted their countries for private gain) and wealthy Westerners alike anonymously route their money through the US economy. It’s a system that’s evolved over decades—a race to the bottom led by states desperate to ensure a steady flow of revenue. It involves a sprawling network of trust companies, law firms, and real estate agencies that facilitate the transfer of suspect money. And it’s made the United States one of the world capitals of kleptocratic cash.

Today, there’s no need to stash your money in the Bahamas, Malta, or the Caymans when you can keep it in places like Sioux Falls, South Dakota. Thanks to favorable laws that make it an ideal refuge for the world’s wealth, America now sits at the center of the global offshore economy—an international pot of riches even larger than the GDP of China, by some estimates.

Journalistic investigations like the Panama Papers and Pandora Papers have helped expose the scourge of shell companies that are the linchpins of these offshore networks. Such corporate formations—which provide anonymity to the people behind them and are largely impenetrable to authorities trying to track the money—are not unique to the United States. Other Western democracies, including the United Kingdom, have also allowed them to flourish. But the US has gone far beyond most other countries in the level of secrecy that it provides, and it has done so at a far greater clip than any of its peers.

The rise of the American shell company stretches back to the late 19th century, when New Jersey enabled the formation of holding companies—helping create America’s first monopolies—without requiring them to transact business in the state. So many firms re-registered in the Garden State that people in other states, which were suddenly losing out on taxes and fees, began calling it the “Traitor State.”

New Jersey’s corporate dominance didn’t last long. In the 1910s, when Gov. ­Woodrow­ Wilson enacted reforms to crack down on corporate abuses, other states spied an opportunity. One raced to fill the void: “Delaware,” noted an American Law Review article from the era, was “gangrened with envy at the spectacle of the truck-patchers, sand-duners, clam-diggers and mosquito-wafters of New Jersey getting all the money in the country into her coffers…determined to get her little tiny, sweet, round, baby hand into the grab-bag of sweet things before it is too late.”

An American flag waves in an opaque, foggy light blue background.
Nicolás Ortega

Not only did Delaware’s legislature up the ante on enticements—exempting corporations from taxes and reimbursing their directors for damages incurred by litigious shareholders—but its Chancery Court began producing the most pro-corporate rulings in the country. For good measure, the state also granted anonymity to anyone who wanted to register a company there.

By 1929, 42 percent of state income came from corporate registration fees and taxes. With a population of a tad more than 1 million, Delaware is now home to 1.9 million corporations, including more than 300,000 registered in 2022 alone. Each year, it rakes in some $2 billion in corporate taxes and fees, far more than any other state. The constituents of Delaware lawmakers, “in a very real sense, are companies,” as the University of Cambridge’s Jason Sharman, an expert on money laundering and corporate regulation, has noted.

Other states, such as Nevada and Wyoming, have followed suit, creating their own rules that benefit people looking to hide, launder, or otherwise stow their fortunes via American shell companies.

But they are only part of the story, because kleptocrats and oligarchs can only use the funds they plow into anonymous shells if that money is then laundered into something. Which brings us to the second component of the offshoring playbook: real estate—an industry “so perfect,” in the words of Financial Times investigative reporter Tom Burgis, that “it might have been built to launder.”

Tracing how US real estate became the asset of choice for sanctioned Russian tycoons, African autocrats, drug lords, and uberrich Americans requires going back to the darkest days of the early 21st century. The PATRIOT Act—passed in the aftermath of 9/11, when fears about money being spirited to terrorist cells were white-hot—contained a suite of policies to prevent suspect funds from entering the United States. American banks were required to scrutinize transactions and flag suspicious activity.

The law’s money-laundering provisions were intended to go much further, forcing other industries—particularly real estate—to shore up their dirty money defenses. But shortly after the law’s passage, the Treasury Department announced a temporary exemption for real estate deals. Bush administration officials declared that they wanted to further study the law to make sure it wouldn’t inadvertently hamstring the industry. Months passed, then years, then decades. Today, this exemption remains firmly in place, and American real estate agents and firms are still under no legal ­obligation to check the sources of their clients’ wealth or report even the most obvious red flags. Not surprisingly, the world’s elites have taken full advantage.

Pick a case of international kleptocracy, and you are likely to discover a link to US properties. Millions connected to ­Malaysia’s sprawling IMDB scandal, all looted from the country’s sovereign wealth fund, were plowed into hotels in New York and Beverly Hills. (Plundered funds, fittingly, were also allegedly used to finance the film The Wolf of Wall Street.) In 2014, the New York Times reported, the daughter of a former longtime ruler of the Republic of Congo bought an apartment at the Trump International Hotel and Tower in Manhattan. (There’s no indication Trump broke the law, but this was one of many intersections between kleptocratic regimes and his real estate empire.) Another example: The world’s second-longest-­standing dictator, Equatorial Guinea’s Teodoro Obiang Nguema Mbasogo, owns a massive home in Maryland, where for years he was neighbors with former Gambian despot Yahya Jammeh.

It’s not just mega-mansions, luxury apartments, and beachfront hotels. American manufacturing plants, oil wells, timberland, and more are wide open to anyone with the right number of zeros in their bank account balance. Oligarch Ihor Kolomoisky, arrested by Ukrainian security forces in 2023 on money-laundering charges, reportedly became Cleveland’s top landlord and also secretly bankrolled real estate purchases in Kentucky, Illinois, and West Virginia. These investments, according to a federal civil forfeiture complaint, were part of a larger transnational money-laundering scheme that gutted economies in the United States and Ukraine.

Depositing ill-gotten gains into US properties allows crooks to wipe their fingerprints off the money. Meanwhile, real estate agents and companies have enjoyed record profits. The US housing market has more than quadrupled in value over the past two decades, and the industry is spending about twice as much on lobbying now as it did in the early 2000s, including on efforts to resist being held to the same anti-money-­laundering­ standards as banks.

Moving money into America’s safe havens typically requires middlemen skilled in the intricacies of the financial system. There are plenty for hire. US lawyers, just like real estate agents, needn’t question where their clients’ cash is coming from. Indeed, the American Bar Association has argued that such checks are anathema to a lawyer’s role as a client advocate. Whereas Europe has imposed strong anti-money-laundering restrictions on its attorneys, the US and Canada stand virtually alone in the Western world for opposing such measures. That leaves these countries’ lawyers free to make money helping kleptocrats construct impenetrable financial networks. Despite recent pressure from civil society groups and attorneys who want to clean up their industry, the legal sector remains a vital enabler for the crooked and the corrupt.

In 2016, 60 Minutes aired a video sting spearheaded by the anti-corruption watchdog Global Witness that illustrated how willing US law firms had become to facilitate money laundering. Posing as an adviser to an African minister looking to sanitize millions in dirty money, a Global Witness investigator met with 13 New York firms to ask their advice. All but one dove into details about how best to skirt money laundering protections and obscure the origins of their funds.

Naturally, setting up anonymous shell companies was a popular theme. Doing so would obscure the ties between a company and its owner, and having a lawyer incorporate the company might allow them to claim attorney-client privilege. Some of the lawyers advised establishing a whole other shell company in a traditional offshore jurisdiction—say, the Cayman Islands or Bermuda—as an additional buffer. Some went even further. They proposed funneling the dirty money directly into their firms’ escrow accounts, potentially mixing the illicit money with other client funds. One lawyer, James Silkenat, went into detail about how the African minister could work around existing money-­laundering checks. Silkenat wasn’t just any attorney. He was head of the American Bar Association. (Silkenat told Global Witness that he acted properly at the time.)

Shell companies that hide dirty money, real estate purchases that launder it, and lawyers who facilitate the financial spin cycle—these three components explain much of the United States’ role in the global offshore economy. But a fourth factor has made the country an unparalleled haven for the world’s illicit money. And that brings us back to South Dakota.

When South Dakota’s economy cratered in the early 1980s, Gov. William Janklow, like those Gilded Age politicians before him, hatched a plan to attract as much capital as he could. Taking advantage of a recent Supreme Court ruling, South Dakota lifted interest rate caps for banks, which raced to set up shop there. But Janklow wasn’t done. Realizing the riches waiting to be mined in financial deregulation, his administration turned to another industry: trusts.

Trusts are deceptively simple concoctions. First developed in the Middle Ages, they involve a person (the “settlor” or “grantor”) assigning legal control of their assets to another individual (the “trustee”), who manages and distributes those assets for recipients (the “beneficiaries”). And they do so largely in complete secrecy. “Trusts are powerful mechanisms,” British investigative reporter Nicholas Shaxson writes, “usually with no evidence of their existence on public record anywhere.”

This gave Janklow an idea: What if South Dakota could use trusts to attract capital? Trusts historically had expired within about a century, or a few decades after the death of the settlor, forcing the distribution of any remaining assets. But there was no reason, as Janklow saw it, that trusts ever had to end. In 1983, South Dakota repealed the regulation that limited the duration of these secretive trusts. In doing so, the state introduced a new tool to the world: “perpetual trusts,” sometimes called “dynasty trusts.”

Nor did Janklow stop there. In 1997, having seen big money flowing into his state to take advantage of its perpetual trusts, he formed a “Trust Task Force” that proposed regulatory changes favorable to the industry and its clients. “South Dakotans­ should be proud of the economic benefits of a healthy, well-regulated trust ­industry,” Tom Simmons, an expert on trust law at the University of South Dakota and a member of the task force, told me. It “helps people across the country and even the globe.” But critics saw the task force’s work in a different light. Its recommendations, noted one state legislator, made it seem like industry representatives were “writing laws essentially for themselves.”

As was true in Delaware, there appeared to be no end to how far South Dakota lawmakers would go to accommodate trust companies and their clients, no matter the source of their wealth. In South Dakota, which has no income or estate tax, trusts are kept entirely secret from the public—including journalists, tax authorities, and human rights activists trying to track down looted assets—and even court documents pertaining to them are kept private in perpetuity. Under current law, no information on South Dakota trusts will ever be shared with other governments.

What’s more, anyone looking to stash their funds needn’t have any connection to the state or its local banks. One South Dakota trust specialist estimated that nearly all of the trusts there “are what I call shell companies, where you basically have a PO Box or an office and somebody will come here twice a year to have board meetings and meet regulatory requirements. But there’s nobody here with feet on the ground.”

Most of Kingdom Trust’s employees are based in Kentucky. And clients hiding their money in South Dakota no longer need traditional beneficiaries like spouses, children, or grandchildren. Instead, they can designate a trust company as trustee and list themselves as beneficiaries. Other instruments, such as living trusts, provide similar structures, but the beauty of South Dakota’s dynasty trusts is that they need never dissolve—meaning that every successive generation can partake, building more and more untouchable wealth, indefinitely.

Hundreds of billions of dollars have so far flowed into South Dakota trusts. If the trend lines hold, its trusts will hold trillions in untraceable wealth by the end of the decade, and tens of trillions by 2050. “Forget Switzerland,” one local journalist put it. “South Dakota is actually one of the best places in the world for the wealthy to stash their cash in secret.”

Even amid the Wild West of South Dakota’s trust industry, Kingdom Trust stood out for its lack of meaningful safeguards. The company “opened its doors to a high-risk business that it did not understand,” one Treasury Department filing noted, “and allowed high-risk customers to continue to move billions through the U.S. financial system without required reporting.”

The company’s monitoring of potential money laundering was handled by a single employee with “no prior” expertise in the area, according to US officials. Unsurprisingly, federal investigators ultimately discovered that Kingdom Trust’s client roll was littered with clear signs of criminality. The company “willfully failed to timely and accurately report hundreds” of suspicious transactions, Treasury officials noted, and “allowed illicit actors to use their accounts at Kingdom Trust to engage in activity that appears related to apparent trade-based money laundering and securities fraud schemes.” Oliver Bullough, a leading journalist covering transnational crime, wrote that its clients were “not so much waving red flags as they are entirely dressed in red flags while sitting in a red flag factory, based in a town called Red Flag.”

Last April, the Treasury Department announced it was slapping Kingdom Trust with a $1.5 million penalty. FinCEN called this first-of-its-kind fine “an important statement that we will not tolerate trust companies with weak compliance programs that fail to identify and report suspicious activities, particularly with respect to high-risk customers whose businesses pose an elevated risk of money laundering.” (Kingdom Trust did not respond to questions for this story.)

There has lately been a burst of activity in Washington fueled in part by the revelations of the Panama Papers and by efforts to prevent Russian oligarchs and Putin cronies from evading sanctions. In 2021, Congress passed the Corporate Transparency Act, which took effect in January and, though riddled with loopholes, will require shell companies to disclose their owners to FinCEN.

The following year, legislation to impose new reporting requirements on attorneys, art dealers, and other professionals who interact with money launderers garnered bipartisan support. (The so-called ­ENABLERS Act was derailed by ranking Senate Banking Committee member Pat Toomey [R-Pa.], who soon after left the Senate and went to work for cryptocurrency and private equity firms, industries that had lobbied against the bill.) The Treasury Department is now preparing to roll out new rules targeting money laundering in real estate. It’s not a panacea­, but it’s a significant step forward.

Despite these federal efforts to close the conduits of illicit cash, the trust industry remains largely untouched. In fact, the Kingdom Trust case was notable only because FinCEN took action at all—the actual fine it imposed on the firm amounted to a rounding error.

Nor does South Dakota have plans to make itself less hospitable to dirty money. It underscored this point recently by denying records requests for information about when the state’s banking division had last examined Kingdom Trust and how it had assessed the firm’s risk-­management practices. The basis for its denial? Some of the very same trust secrecy laws that South Dakota enacted to shield its corporate clients from prying eyes—and that have made it a haven for the darkest of the world’s dark money.


We have about a $170,000 funding gap and less than a week to go in our hugely important First $500,000 fundraising campaign that ends Saturday. We urgently need your help, and a lot of help, so we can pay for the one-of-a-kind journalism you get from us.

Learn more in “Less Dreading, More Doing,” where we lay out this wild moment and how we can keep charging hard for you. And please help if you can: $5, $50, or $500—every gift from every person truly matters right now.

payment methods


We have about a $170,000 funding gap and less than a week to go in our hugely important First $500,000 fundraising campaign that ends Saturday. We urgently need your help, and a lot of help, so we can pay for the one-of-a-kind journalism you get from us.

Learn more in “Less Dreading, More Doing,” where we lay out this wild moment and how we can keep charging hard for you. And please help if you can: $5, $50, or $500—every gift from every person truly matters right now.

payment methods

We Recommend


Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.


Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.