Here Is Rothschild's Primer How To Launder Money In U.S. Real Estate And Avoid "Blacklists"

Anyone closely following the Panama Papers tax haven story, is by now familiar with the role that Rothschild plays in providing virtually identical services right inside the US by the Rothschild Trust, as explained in our recent article "Rothschild Humiliates Obama, Reveals That "America Is The Biggest Tax Haven In The World."

They are also probably familiar with the name Andrew Penney profiled in January by Bloomberg as follows:

Rothschild, the centuries-old European financial institution, has opened a trust company in Reno, Nev., a few blocks from the Harrah’s and Eldorado casinos. It is now moving the fortunes of wealthy foreign clients out of offshore havens such as Bermuda, subject to the new international disclosure requirements, and into Rothschild-run trusts in Nevada, which are exempt.

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For financial advisers, the current state of play is simply a good business opportunity. In a draft of his San Francisco presentation, Rothschild’s Penney wrote that the U.S. "is effectively the biggest tax haven in the world." The U.S., he added in language later excised from his prepared remarks, lacks “the resources to enforce foreign tax laws and has little appetite to do so.”

So for all those now former Mossack Fonseca clients, or their "Panamanian" peers who have not been rooted out yet, or for anyone else who wishes to open a domestic "trust", here is the primer straight from Rothschild Trust.

Key highlights:

• In the year since we opened Rothschild Trust North America in Reno, Nevada, we have discovered the versatility of Nevada trusts and their usefulness within the context of our international business.
• Rothschild Trust has long embraced clients with US connections and the complexity this brings to planning. Our new US offering has enabled us to offer creative solutions not only to anticipated situations, but also to unusual or complex scenarios that require bespoke structures.
• In our experience, Nevada trusts can be useful planning tools not only for onshore or first generation American families, but also for  foreign offshore families looking to invest in the US.
• Such structures maintain privacy and block US estate tax liability, but are subject to two layers of income tax (at both the corporate and shareholder level) as well as high levels of both income and capital gains tax, making them inefficient for appreciating or income-generating property.

Worried about FATCA exposure abroad? Just use Rothschild domestically:

• In the build-up to FATCA implementation, some US clients who had assets in offshore trusts for historic reasons have decided to domesticate these structures to lower the burden of reporting. These domestications form part of the general trend we have seen towards moving structures onshore.
• The US, and Nevada in particular with its favourable trust laws and attractive state tax regime, offers a variety of planning opportunities that can achieve complex planning aims with simplified reporting obligations and compliance concerns.

Here Rothschild explains to foreigners how to launder money using U.S. real estate:

• The foreign company contributes its shares to the US LLC and then liquidates, and the US corporate subsidiary it owns elects to be treated as a qualifying sub-chapter “S” subsidiary. The end result is a single layer of US income tax and reduced rates on income and capital gains tax, though in the case of property that has appreciated greatly in value – such as, for example, prime New York condominiums – there can be a significant tax cost to the liquidation.
• We have recently seen the usefulness of “foreign” Nevada trusts for offshore foreign investors in US real estate. The appointment of a foreign protector to a trust that would otherwise qualify as a US domestic trust causes the trust to fail the “control” prong of the US court and control test for trust situs, and therefore prevents the trust from qualifying as tax-resident for US federal income tax.
• Generally, this type of structure is useful for foreign offshore investors in US real estate (or other US situate assets) who do not wish to file US tax returns in their own name and who, having no personal US nexus, would like to minimize the amount of US tax payable on the investments

This, of course, would not be possible if the National Association of Realtors was not complicit. Which it is, as we have covered since 2012:

Many of you reading this will undoubtedly have spent time in an international bank and been forced to sit through countless hours of “know your client” and AML training. Fascinating to note that the National Association of Realtors lobbied for and received a waiver from such regulation. That’s right, realtors actually went to the U.S. government and said: we want to be able to help foreign business oligarchs and other nefarious business people launder money through the real estate markets of the United States – and prevailed.

Here's their official position:

"NAR supports continued efforts to combat money laundering and the financing of terrorism through the regulation of entities using a risk-based analysis. Any risk-based assessment would likely find very little risk of money laundering involving real estate agents or brokers. Regulations that would require real estate agents and brokers to adopt anti-money laundering programs may prove to be burdensome and unnecessary given the existing ML/TF regulations that already apply to United States financial institutions."

So far, regulations that prevent foreigners from laundering money in the US have indeed proven "burdenseome." The result: record high luxury real estate prices which is now used by foreign oligarchs and money launderers as the modern day "Swiss bank account", and which make this particular sector of US housing accessible only to other foreigners.

If you are still not convinced to use Rothschild, here is one more reason: to avoid a "blacklists" - after all, everyone is anonymous:

• Nevada “foreign” trusts may also prove attractive to settlors from politically sensitive countries who are grappling with blacklists and strict CFC regulations as they seek to structure their assets.

And here is where Rothschild comes as close as it possibly could to putting that US-based tax havens are used for tax evasion:

The use of Nevada “foreign” trusts avoids blacklists and the stigma that can come with placing assets in jurisdictions typically viewed as tax havens, without creating exposure to US income tax on non-US income. As more countries adopt blacklists, strict CFC regimes and other measures designed to shut-down perceived tax havens, the flexibility and higher degree of certainty afforded by US trusts may become increasingly attractive.

The question, then, is why does the US not adopt such a regime which makes money laundering impossible for both foreigners and in more limited instances, residents? For now, however, it hasn't and probably won't, despite Obama's heartfelt appeal on Tuesday that "Tax avoidance is a big, global problem."

So for all those who can't wait to use Rothschild for all their "Trust" needs, here is your contact: