Officials in South Dakota have figured out how to make up for the complete collapse of their oil fracking industry. They are morphing the Peace Garden State into a major offshore banking center.

South Dakota is not alone. Some 200,000 corporations, limited liability companies, and family trusts, are registered in remote Stateline, Nevada on the sparkling shores of Lake Tahoe.

And there has been a sudden outbreak of expensive John Lobb shoes, Turnbull & Asser shirts, and Brioni suits in rustic Cheyenne, Wyoming, as foreign bankers and their high paid tax attorneys descend on the city in droves.

Meet the United State of America, the new tax haven capital of the world.

Friends in the business tell me that accounts in Switzerland, the Cayman Islands, and the British Virgin Islands are being closed down by the tens of thousands and moved to the US shores.

Almost all of this money is being transferred by wealthy European, Middle Eastern, and Chinese families who are more interested in in “return of capital” than “return on capital.”

It’s best to pay a few dollars in American taxes than have your money expropriated by a corrupt and covetous foreign government, have your children kidnapped, or get stood up against a wall and shot.

The move is being prompted by the Obama administration, which pushed through the Foreign Account Tax Compliance Act of 2010, known as FACTA.

Its goal was to flush out wealthy Americans hiding income and assets abroad. The law saddles offshore banks with hefty penalties and fines for helping US citizens avoid the IRS.

Only last year, Rothschild Bank was hit with a $11.5 million fine for helping 300 Americans hide $794 million in assets.

The law has had the unintended consequence of bringing rich foreigners into compliance as well. It is almost impossible now to open a bank or brokerage account in a country that is not FACTA compliant.

You are really limited to the dubious domiciles of Nauru, Bahrain, and Vanuatu, all favorites of organized crime, drug dealers, and terrorist groups.

As a former Swiss banker myself, I can tell you that Swiss secrecy was always a myth.

The ice broke during the 1980’s when Switzerland froze the accounts of the Ferdinand Marcos family (who I once interviewed for The Economist magazine) who had spent decades looting the government of the Philippines.

Investigators finally found the money invested in several office buildings in Manhattan. The money was eventually returned to the people of the Philippines.

The Swiss reputation for secrecy took a further blow in 2007 when Bradley Birkenfeld, a US citizen working for Union Bank of Switzerland, made the unfortunate decision to fly from Europe to the Caribbean, changing planes in New York City.

There he was promptly arrested for helping his fellow countrymen avoid taxes. Among the many pearls of wisdom we learned from this case was that the bank advised clients to sneak cash out of the US by sticking large carat polished diamonds into toothpaste tubes.

As a result, 80 Swiss banks paid more than $5 billion fines. Birkenfeld served a three-year jail sentence after turning over a list of 20,000 US clients. The IRS graciously allowed an amnesty period for his customers.

Birkenfeld was eventually paid a $104 million reward by the IRS Whistleblower Office for turning in his clients, some 30% of the taxes recovered, the largest in US history. Now Birkenfeld has a wealth management problem of a different kind.

The Swiss haven’t been driven into the poor house yet. They are still holding $1.9 trillion in assets for foreign depositors.

The great irony in all of this is that a number of candidates have been campaigning for president claiming that America is in a long-term decline, and that money is leaving the country.

The foreign 1% beg to differ.

A Former Swiss Banker