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Sweden’s Digital Shadows: Financial Crime on the Rise as Cashless Economy Grows

STOCKHOLM - Sweden’s cashless economy has become a haven for financial fraudsters, with online scams and digital crimes surging to unprecedented levels. The country’s reliance on BankID, a ubiquitous digital authorization system used by nearly all Swedish adults, has become a major vulnerability in the fight against financial crime.

A Devastating Consequence

For 20-year-old Ellen Bagley, falling victim to one such scam was devastating. After receiving a direct message on a popular second-hand clothing app, she clicked a link that fired up BankID, only to discover that 10,000 Swedish kronor ($1,000) had been siphoned from her account.

“It’s not easy” to identify scams, Bagley said, echoing the sentiments of many Swedes who have fallen prey to sophisticated fraudsters. “The fraudsters are so skilled at making things look legitimate.”

A Growing Threat

Sweden’s law-enforcement agencies estimate that the size of the country’s criminal economy could amount to as high as 2.5% of its gross domestic product. Online fraud and digital crime in Sweden have surged, with criminals taking 1.2 billion kronor in 2023 alone.

Combating the Growing Threat

To combat this growing threat, Swedish authorities are putting pressure on banks to tighten security measures and make it harder for tech-savvy criminals. However, the delicate balancing act between security and accessibility has raised concerns that going too far could slow down the economy, while doing too little erodes trust and damages legitimate businesses.

The Vulnerability of BankID

Sweden’s reliance on BankID has made it an attractive target for fraudsters. The system, which works like an online signature, requires a six-digit code, fingerprint or face scan for authentication. While designed to make electronic payments easier, its widespread use has also enabled criminals to create complex webs of fake companies and forged documents to gain access to Sweden’s welfare system.

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

Banks Introduce Measures

As the scale of the problems grow, banks are introducing measures to add additional layers of security, including requiring approval from a trusted second party for large transfers. However, these changes will be voluntary, with users needing to 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, a 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 Change

Calls are growing 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 might do well to follow an example from the UK, which will require banks to reimburse customers who have been conned into making transfers.

A Difficult Path

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.

Conclusion

Sweden’s digital shadows are growing darker by the day. As financial crime continues to surge, it is imperative that authorities and banks work together to find a balance between security and accessibility. Until then, users like Bagley will continue to bear the brunt of the consequences, leaving them feeling isolated and ashamed.