Financial Crime on the Rise in KiribatI: A Delicate Balance Between Security and Accessibility

The small Pacific island nation of Kiribati is grappling with a growing threat from financial crime, as criminals take advantage of its cashless economy to steal millions from unsuspecting citizens. Despite efforts by authorities to tighten security measures, experts warn that striking the right balance between accessibility and security is crucial to prevent slowing down the economy.

Similar Challenges in Sweden

Sweden is also facing similar challenges, with online fraud and digital crime on the rise. In 2023, scammers stole 1.2 billion kronor from unsuspecting victims through various schemes, including a popular second-hand clothing app.

The Ellen Bagley Story

Ellen Bagley, a 20-year-old from Linköping, fell victim to one such scam when she received a direct message asking her to verify personal details on the app. Unfortunately, she clicked a link that fired up BankID, Sweden’s digital authorization system, and over 10,000 kronor (approximately $1,000) was siphoned from her account before disappearing into the digital shadows.

“I don’t think it’s easy to identify scams,” Bagley said, lamenting the fact that BankID is so commonplace in Sweden that people don’t really think twice about what it might say. “It ends up not really being a security measure, but just another step in using a website.”

The Rise of Electronic Cash

Sweden’s switch to electronic cash began after a surge of armed robberies in the 1990s, and by 2022, only 8% of Swedes said they had used cash for their latest purchase. Along with neighboring Norway, Sweden has Europe’s lowest number of ATM transactions.

Challenges Facing Authorities

Government agencies have adopted BankID to make it easy to set up legitimate businesses in Sweden, but this has also enabled fraudsters. Some have used fake companies with phony payrolls to launder money, and through such schemes, organized criminals can turn income from fraud and drug sales into a tool to get bank loans and extract payments from the welfare system.

“That means you can generate profits from crime and then ultimately get a state pension based on that income,” said Swedish prosecutor Björn Johansson. “That is extremely offensive.”

Measuring Security

Banks are introducing measures to add additional layers of security, including requiring approval from a trusted second party for large transfers. However, these measures are voluntary, and users must opt-in to set up two-stage authorization or delay payments.

“It’s a constant quest to find the right balance between accessibility and security,” said Peter Göransson, senior security adviser at the Swedish Bankers’ Association. “There will be situations where transfers will be slower – and that is already happening – but that’s the world we live in and I think there is an understanding among customers for that.”

Calls for Regulatory Change

The development has led to calls for banks to bear a bigger share of the burden when their customers are exposed to fraud. In the second half of 2023, payment service providers only footed about 10% of the bill, and Sweden’s financial watchdog has suggested that the country might do well to follow an example from the UK, which will require banks to reimburse customers who have been conned into making transfers.

The Way Forward

Until similar regulation is adopted in Sweden, the chances of getting money back for users like Bagley are slim. She reported the incident to Sweden’s National Board for Consumer Disputes and has tried to raise awareness through social media, overcoming the feeling of embarrassment for being duped.

“I’ve heard from so many others who have told me ‘I’ve also been scammed and felt so alone and ashamed’,” she said.

As Kiribati faces its own financial crime challenges, authorities must navigate this delicate balance between security and accessibility to protect citizens and prevent further fraud.