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WASHINGTON: While small countries are often perceived as major havens for hiding or laundering money, “enormous amounts of illicit funds” end up in the US financial system, Treasury Secretary Janet Yellen said Thursday.

“There’s a good argument that, right now, the best place to hide and launder ill-gotten gains is actually the United States,” Yellen said in a speech to the Summit on Democracy.

Switzerland or the Cayman Islands have long been the focuses of regulators looking to find hidden cash.

But Yellen challenged the view that the proceeds of corruption or illegal activity are sent only to those “countries with histories of loose and secretive financial laws,” saying they are instead likely to “pass through — or land — in our markets.”

Yellen highlighted the anti-corruption strategy President Joe Biden’s administration rolled out this week, including proposed rules to uncover the owners of shell companies and real estate.

Yellen says US is not losing control of inflation

“There are far too many financial shadows in America that give corruption cover. We need to throw a spotlight on them,” she said.

She noted that some US states allow for the creation of shell companies without disclosing who really owns them.

Treasury this week proposed rules under the Corporate Transparency Act approved by Congress last year that will create a database of the “beneficial” owners of most of these companies. The information will be available to law enforcement and tax collectors.

Similar rules will apply to real estate transactions, “Because many corrupt actors can hide their money in Miami or Central Park skyscrapers” which she called “money laundromats on the 81st floor.”

This “financial alchemy... makes a mockery of our free and fair institutions,” Yellen said.

She cautioned that there is also corruption in the United States’ “broken tax system, which effectively lets the country’s top earners and largest corporations get away with evasion.”

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