Hiroshi took the train to talk with Masaharu Watanabe at the National Tax Agency. The train gave him time to think, the best place for it. With the virus dominating daily life, every train ran at half capacity, about where they should be. Everyone on the train was masked or double-masked, and the open windows let a cool stream of fresh air into the car.
Hiroshi reset his cellphone for both strong vibration and loud ring. He didn’t want to miss any incoming calls. The girls, if they were going to be moved, would probably be moved during the day. The police were ready to act instantaneously if a sighting came in, and Hiroshi had to be ready to get to wherever they turned up.
Were the daughters reason enough to come back to Japan? Why would Patrick do that in person? Was he taking them back to Wyoming? Pending divorce and the fear of being denied custody or visitation rights was horrifying, but was that enough? Patrick could have done all of it, but the money, wherever it was, would be telling. The beatings were done by practiced hands, not a sloppy explosion of passion.
At Kasumigaseki Station, police in riot vests with long keijo staffs stood at the inside exits, many more than usual. The station, like most in Tokyo, had dozens of entrances to watch when some foreign dignitary, controversial speaker, or the imperial family was visiting nearby.
Hiroshi headed to the Kasumigaseki exit closest to the Ministry of Finance. The wind blew cold as he walked upstairs and along the walkway to the main entrance. Outside, more officers were stationed on every corner. It was a lot of personnel, but it meant they could rapidly descend on any problem with sufficient force.
The National Tax Agency office was housed in one of the squattest and blandest buildings, as if exhorting the bureaucrats and staff who worked there to produce tangible results without being too elegant about it.
Hiroshi’s name was on the visitors’ list, so they waved him through security.
Watanabe had just been promoted to senior investigator in the National Tax Agency, though he was younger than Hiroshi. He always dressed in a trim three-piece suit with suspenders and a bright red and blue tie over a pinpoint Oxford shirt. He looked like a businessman in the Taisho or Meiji era when men’s fashion started to look Western, but still felt Japanese. Hiroshi never wore a tie but thought about it each time he met Watanabe.
The office was small and neatly arranged, with an old wooden desk and folders marked “In” and “Out” in old-style kanji. Watanabe used two computer monitors too. Case files towered across his desk in careful columns. Watanabe held out his hand to shake and then corrected himself with an elbow bump and a laugh. He waved Hiroshi into a chair. “So, Nine Dragons? Great name, right?”
“It looks good on the promo video, that’s for sure.”
Watanabe clicked through files on his computers, looking back and forth at the monitors. “Nine Dragons was one of the fish nibbling off the same hook with another so-called wealth management firm I was tracking. Their so-called ‘managing’ is draining Japan.”
“What kind of tax shelters do they use?”
“Depends on the tax haven. The British Virgin Islands veers one way, Malta another, Nevis and the Bahamas another again. Malta and Luxembourg are the classics—pure bank secrecy. But most are just layers inside layers. What country are we talking about?” Watanabe put his fingers together in front of him and raised an eyebrow.
“The US.”
“South Dakota, Delaware, Wyoming. Lots of choices of late, but I’ll guess Wyoming?”
“How did you know?”
“I’ve followed cases up to the state line, but no further. All states recognize trusts, but Wyoming state law allows any LLC to have complete control of a trust through an agent. All anyone needs to be an agent is an address and a heartbeat. The agents often know nothing about the companies. And some act as agents for a couple of hundred companies.”
“No way in for us, and lots of ways out for them.”
“Precisely. They call it Offshore Wyoming USA. Nice marketing, don’t you think?” Watanabe chuckled. “Wyoming now has the strongest privacy laws in the US, maybe in the world. It’s outlawed even cursory oversight from regulators.”
“I thought America was the land of laws?”
“Except when it’s not. And then it’s the land of freedom. Financial, in this case. In Wyoming, company owners don’t need to identify themselves. The industry is sprawling, growing, becoming even more anonymous. Every state has its own banking laws and Wyoming loosened theirs to bring in as much business as possible. It’s the Wild West.”
“How does that work?”
“I guess they buy off the state legislators. Once the firms set up LLCs with a registered agent, they can put a private trust company inside that LLC for another layer of protection, add on a second company for assets, and slather the whole thing in misleading information. The agents don’t have a clue. The state officials look the other way.”
“What do those trust companies start at?”
Watanabe pulled on his suspenders. “Anonymity isn’t cheap. Most want a hundred million US to get started. But how much do they funnel through? That’s the thing we don’t know. What we do know is they are exempt from any periodic examination or state scrutiny, much less tax authority.”
Hiroshi hummed. “It feels very Japanese, doesn’t it? Wrapping something valuable inside layers inside layers, like a gift or a kimono.”
“But a lot less pretty. Maybe that’s why you’re here, to see what kind of wrapping Nine Dragons likes to use?”
Hiroshi nodded. “And to figure out what kind of client would ask Nine Dragons to wrap up their wealth?”
“Anyone who wants to shield it from taxes.”
“That doesn’t narrow it down much.” Hiroshi sighed. “Do you work with anyone over there about all this?”
“I used to get help from one of the state regulators, but she quit. Blocked from doing her job by privacy laws. She told me some days she did nothing except draw her pay. The Equality State, Wyoming. That used to be a claim for equal rights, but with enough money and the right lawyers…”
“And someone to structure your company…”
“You can have a little more equality.” Watanabe chuckled. “So, Nine Dragons was in Wyoming?”
“One of their guys moved there for a year. I don’t think he was on vacation.”
“Probably not.” Watanabe put his hands together and sat quietly. “I’ll check into it. Can you give me a few days?”
“That’s the one thing I can’t give you. He abducted his daughters. We have to find them. I don’t think it’s just a divorce gone bad.”
Watanabe reset his suspenders and leaned forward. “Wealth does strange things to people, and protected wealth even stranger things. Want me to expedite access to their books?”
“I do, but it’s tangled up already. Nine Dragons is a Chinese company.”
“The Chinese are everywhere. But that won’t stop us getting inside the way I do it.”
“That’d be helpful.” Hiroshi made a few notes. “How would a firm like Nine Dragons get money out of Japan?”
“They move it from big Tokyo banks to regional banks, and then send it along in smaller pieces. The smaller, local banks in the north were hit pretty hard after the Tohoku earthquake. So now they generate income by facilitating capital flight.”
“They do it for the transfer fees? That can’t be much.”
“It adds up. And doesn’t take much time.”
“Where do the small banks send it?”
“To whatever foreign bank they have connections with.”
“Doesn’t that generate Suspicious Activity Reports?”
Watanabe leaned back in his chair. “For years, the Ministry of Finance ignored the SARs. And most of the time, the banks file the SARs late, sometimes six months late.”
“By which time the money is long gone.” Hiroshi tapped the desk. “But it flows along traceable paths at some point.”
Watanabe leaned forward. “Of course it does. But when confronted, the banks say they didn’t know the company was fake, that it was an oversight, that the other bank accepted it, or whatever excuse comes to mind most quickly. Undelivered goods or the return of a loan are always good excuses. Loans are often in cash. There are plenty of dodges.”
“So Nine Dragons could move unlimited amounts if they’re clever enough.”
“Nine Dragons probably has contacts at banks all through Asia.”
“So they came here because it’s easy to tap in and siphon off.”
“The regional banks in Japan send it to big banks in Hong Kong, New York, London, wherever. Then small regional banks in Panama, Liechtenstein, or the Caribbean receive the deposits from those big banks. And from there, it makes its way piecemeal to Wyoming before being reassembled. Once there, it’s given ‘Wyoming Home Cooking.’” Watanabe slapped his stomach. “Nice, huh?”
“It sounds like you have it all figured out.” Hiroshi sighed.
Watanabe leaned back in his chair. “If I had it figured out, they wouldn’t keep getting away with it. The Ministry of Finance is working to close the loopholes, but when it involves other ministries, inertia sets in. Along with jealousy, territoriality, indifference.”
“What about the SARs? They seem like the weak point of the whole operation.”
“That’s the point of the SARs. But there are hundreds, even thousands a day. They deluge the system. You want to check all those? Impossible. The irony is Japan has a good reputation.”
Hiroshi sighed. “You mean Japan seems so aboveboard, so no one wastes much time digging below the surface?”
“That’s right.” Watanabe laughed. “Japanese seem too honest to check up on.”
“So, that’s why Nine Dragons set up shop in Tokyo.”
Watanabe spread his arms. “Plus, in Tokyo, there are so many great places to spend what they rake in. Upscale apartments, luxury goods, high-end restaurants. Tokyo has higher strata of luxury most people never see. And you can pay for anything in cash here. What’s not to like?”