It is on the state level that these fully legal tax haven mechanisms accentuate the combative relationship that US tax policy has with international methods of preventing corruption and money laundering. Looking to South Dakota first, it is clear from their legislative language that the state values individualism over the prevention of corruption. Interestingly, if not anecdotally, the South Dakota Department of Revenue Sales and Use Tax Guide includes a “Taxpayer’s Bill of Rights” which stresses confidentiality and one-sided transparency . According to the Tax Justice Network (TJN) the United States is ranked second globally in tax havens for money laundering purposes. This is in large part due to the tax laws found in states like South Dakota. Such practices can be found in trusts like the South Dakota Trust Company . South Dakota has had a relatively long history of fostering tax havens for individuals and in 1983 it was the first state to pass a law explicitly rejecting the enforcement of any Rule Against Perpetuities statutes . According to this law, which is a minority norm in most US states, the value of trusts can be passed down generationally without being affected by inheritance tax regulations. This fundamental tax avoidance mechanism creates an intergenerational buffer between possibly ill-gotten gains and any subsequent probing following the death of a bad actor.

Furthermore, through these statutory mechanisms, states like South Dakota have replaced common international money laundering locations. As detailed in the ICIJ’s Pandora Papers, tens of millions of dollars that had been previously housed internationally are now being channeled through the mid-western state. Additionally, South Dakota-based trusts have seen rapid growth in assets over the past twenty years, amounting to an estimated total value of over $360 billion . It's unclear what, if any, actions the South Dakota state government is taking to prevent these legal channels from being exploited for malicious ends. In fact, over the past ten years, the state has passed laws making it even easier for individuals and corporations to keep their assets out of the eye of the federal government. According to former State Senator Gene Abdullah in 2007, many of the laws passed in the state during the 1990’s and 2000’s were lobbied by these South Dakota trust companies and were passed into law unopposed, primarily due to a lack of understanding by the state legislators . However, it is hard to believe that these pieces of legislation were so technical or financially complex that the ambivalence of the law makers was due to an absence of knowledge.

Although the thirty-seven trusts found in Florida that were connected to some type of financial secrecy pales in comparison to the over eighty found in South Dakota, the Sunshine State has its own complex, and often underhanded, history of using its legislation as a means to launder money . Even dating back to the Prohibition Era, Florida has had an intimate relationship with finance and crime. A financial haven for many famous individuals involved in organized crime, much of the money laundered through the state was used to finance illicit endeavors in both Cuba and Las Vegas alike . In fact, it would be the money laundered through Florida by the Gambino crime family that funded the regimes of Caribbean dictators like Cuba’s Fidel Castro or the Dominican Republic’s Rafael Trujillo in later decades . In more recent years, the state courts in Florida have ruled that the use of online currencies, like Bitcoin, within the context of hiding funds from the eye of the government is not considered laundering because such currencies are not “monetary instruments” .

Despite the best efforts of American states to undermine the federal government’s measures to combat money laundering, many international organizations are working to limit the erosive spread of such activity . For instance, the Organisation for Economic Co-operation and Development, which currently has a membership of 38 countries, has been taking active steps to curtail money laundering worldwide . According to the OECD, one of the biggest obstacles that international organizations are encountering is the use of base erosion and profit shifting (BEPS) to avoid financial accountability . Many governments lose between 4 and 10% of global corporate taxable revenue because of these tactics, amounting to roughly $200 billion in yearly losses . On its face, to combat BEPS, a 15-action plan and accompanying remedies are being developed by the OECD. Some of these measures include preventing monies from being transferred in an unsuitable manner and the banning of treaty shopping. Additionally, a joint meeting of the FATF and the G20 Anti-Corruption Working Group was conducted to address these concerns. According to the OECD, this joint meeting signaled a commitment from delegates of the FATF and the G20 ACWG to explore the practical implications of different approaches for improving beneficial ownership information, and the challenges facing numerous actors . The joint meeting highlighted the level of interest in improving beneficial ownership transparency across sectors and institutions and demonstrated the need for a multilateral approach to tackling concealment of beneficial ownership . However, despite the steps being taken by these collaborative international organizations, it is unclear if they are yielding any substantive results.

The Financial Action Task Force, a France-based intergovernmental organization, in an ongoing report provided a series of recommendations that nations should take to combat money laundering . According to the FATF, their recommendations were created to combat money laundering and terrorist financing, but they can also help combat corruption by safeguarding the integrity of the public sector . Furthermore, they are attempting to protect designated private sector institutions from abuse by increasing financial system transparency, by facilitating the detection, investigation, and prosecution of corruption and money laundering, and by recovering of stolen assets . One of their first recommendations is for individual states to implement policies that actively fight these venal practices. When compared to the policies that the US has implemented on the state level, it is clear that such pledges made by the US, as a member of the FATF, were not done in sincerity. Additionally, according to the Preventative Measures section of the recommendations report, financial institution confidentiality regulations should not prevent countries from implementing the FATF Recommendations . This is similarly at odds with the South Dakota’s Tax Guide that emphasizes one-sided transparency and the discretion of private institutions.

Moving on to a recent report by the International Monetary Fund (IMF), Tackling Tax Havens, the organization addressed changing understandings and expectations of international money laundering mechanisms . The report further addresses the evolving ways in which bad faith actors have utilized legal loopholes in recent years to avoid detection or legal scrutiny. The US is once again identified as a tax haven for nefarious financial activity. The IMF further acknowledges some of the efforts taken by international organizations like the OECD and criticizes the United States for its hesitation to formally acknowledge the role it has as a major player in the global economy and the repercussions of not making a stronger effort to curtail corruption. Furthermore, the IMF cites proposed steps by the Tax Justice Network to combat these pervasive mechanisms. The steps are “automatic cross-border financial data sharing, public registers of beneficial ownership of financial assets, country-by-country reporting, and now a unitary tax with formula apportionment are all on the horizon” . These goals appear to be aligned with the desires of groups like the OECD, however it is unclear just how many nations have taken the steps to incorporate them into their legislation.