The US has become a tax haven, making it hard to sanction Russian oligarchs

• The US has said it will sanction Russian oligarchs and target their assets.
• But the US is also now one of the world's leading tax havens, meaning it's hard to know who owns what.

For years, a new tax haven has been on the rise: The United States. That could pose a problem as the US attempts to crack down on Russian oligarchs and target their wealth.

The Biden administration has said it's sanctioning an "expansive list" of oligarchs, which includes freezing their assets and blocking their properties from being used. But the pervasiveness of those wealth-hiding mechanisms might be a hindrance in sanctioning Russian oligarchs — since it's pretty difficult to know who owns what.

"It undermines our ability to levy meaningful sanctions," Chuck Collins, the director of the Program on Inequality and the Common Good at the left-leaning Institute for Policy Studies, told Insider.

Collins has been sounding the alarm on the "wealth defense industry" — the cottage industry of attorneys, family offices, and more that's ballooned around helping the ultra-wealthy preserve and hide their wealth. Some of that wealth might be hiding down the street from you, in empty luxury apartments to "artports," or art-storage facilities that are technically in free-trade zones.

"Our hands are tied by the fact that we are a weak link in the global money hiding system," Collins said

For instance, Insider's Hillary Hoffower reported on how wealthy Russians are parking their money in Sunny Isles Beach, Florida. The small city — known as "Little Moscow" — has what's called "ghost condos." Rich Russians buy property using shell or holding companies to conceal the true owner. Often, they never live there; the properties just help them get around taxes and allow them to cash out when they need more money.

"In, say, London, where they have higher levels of real estate transparency, they can identify the holdings of the oligarchs and freeze assets, seize assets, threaten to expropriate assets," Collins said."Those are all things that other countries are doing as part of putting sanctions on the Russian oligarchs."

But, without that transparency — Collins said that real estate is likely one of the big ways that offshore money is coming to the US — "we're thwarted in our ability to be as effective as we'd like."

The Pandora Papers, a trove of 12 million financial records uncovered by the International Consortium of Investigative Journalists, found that $360 billion was socked away in South Dakota alone — rivaling some offshore havens. The Tax Justice Network, an advocacy group, ranks the US second in the world for enabling financial secrecy.

Passing legislation that requires registration for the ownership of certain things, like trusts with over $10 million and making the beneficiaries transparent, might help pare down some of the country's wealth-hiding woes, according to Collins. He said that there's an "appetite for transparency in real estate," as would-be-homeowners find themselves priced out as ghost condos linger.

Another way to tackle tax dodgers: Funding the IRS's enforcement efforts. The underfunded and understaffed agency has said it's already been tapped to help sanction oligarchs, but needs 1,300 more workers to work most effectively.

"Our concept of a tax haven was always some little Caribbean island, some small state that had auctioned off its sovereignty to become a magnet for money laundering or money hiding," Collins said. "And now, we're looking in the mirror. It's the US — we're the weak link."