February 03, 2020 "Information Clearing House" - Critics of President Donald Trump frequently use the word “kleptocracy” to describe his leadership, administration, and imprint on American policy writ large.

Before 2016 — before Trump’s election and presidency flipped assumptions about America’s liberal democratic project on its head — the word, which literally means “rule of thieves,” was mostly only used by academics and foreign policy wonks.

Thanks to Trump’s reign, though, “kleptocracy” is having an unprecedented moment.

It’s not hard to see why. As Vox’s Zack Beauchamp argued in 2017, “Trump’s kleptocratic instincts” share significant overlap with post-Soviet dictators and autocratic strongmen elsewhere, from his nepotistic corruption to his insistence on targeting opponents with all the levers of power at his disposal — as seen most obviously in his attempt to strong-arm a foreign government into trying to investigate a political rival.

All of that is, of course, true: Trump’s illiberalism, and his predilection for inserting and expanding corruption wherever he can, is hardly a secret.

But this administration is merely the culmination of the US’s decades-long slide toward becoming the center of modern kleptocracy. The US has become the world’s greatest offshore haven, allowing the crooked and the criminal to launder and stash their ill-gotten gains across the country — money ransacked from national treasuries and prone populations abroad.

For despots and their families, human traffickers and gun runners, there’s no better friend than the US, at least when it comes to hiding their finances from prying eyes, both at home and abroad.

All told, the US has become the key cog in the machine of modern kleptocracy worldwide, allowing illiberal regimes everywhere to flourish — and threatening America’s democratic experiment in the process.

How US states became masters of the shell game

The biggest single provider of anonymous shell corporations in the world isn’t Panama or the Cayman Islands. It’s not the financial secrecy stalwart Switzerland, or a traditional offshore haven like the Bahamas.

It’s Delaware. And the main reason is federalism.

Thanks to the US’s federal structure, company formation remains overseen at the state level, rather than in Washington.

So if you’re a budding autocrat interested in a bit of easy money laundering, you don’t turn to federal officials in Washington. Instead, you look to state officials in Dover, Cheyenne, or Reno to help construct anonymous shell companies to funnel and clean your illegitimate money.

And these states have taken full advantage. Since there are no regulations in the US requiring that shell companies identify their true owners — known as “beneficial owners” – American states have been under no compunction to try to peel back who may be behind the anonymous shell companies mushrooming across the country.

These states and their constituents are raking in fees — at last check, Delaware made some $1.3 billion annually from its company formation industry — so whenever, say, a human trafficker or extremist network sets up an anonymous company in Wilmington or Laramie or Carson City, they have little incentive to try to figure out who may be behind the companies.

Unsurprisingly, the anonymous company industry has been staggeringly profitable for these states. The revenues that Delaware, which pioneered targeting corrupt officials as potential clients for its anonymous shell company industry, continues to make represent about a quarter of the state’s annual budget.

Nevada, which actively marketed itself as the “Delaware of the West” in the early 1990s, directly linked company formation fees to funding teachers’ salaries. And Wyoming, which invented the limited liability company (LLC) in 1977, has been only too happy to capitalize on allowing shell companies to flourish in the state, generating millions of dollars for its general budget — yet another small state all too willing to participate in this “race to the bottom.”

All you need is 15 minutes, a bit of money — Delaware offers packages for around $100, pocket change for the crooked and corrupt racing to the state — and a willingness to conceal your identity, and an anonymous American shell company can be yours. It’s easier than getting a library card.

And what better way to purchase American real estate, perfectly anonymously — which almost all of the US (outside of a few major metro areas) continues to allow — than via an anonymous American shell company?