Here is SwedenLOCALSWEDEN
Ellen Bagley was delighted when she made her first purchase on a popular second-hand clothing app, but just minutes later, the 20-year-old girl from Linköping, Sweden, found out that she had been scammed, and her excitement turned to shock.
When Bagley received a direct message on the platform asking her to verify her personal details to complete the transaction, everything seemed normal. She clicked on the link and launched BankID – the ubiquitous digital authorization system used by almost all Swedish adults.
After receiving a few error messages, she began to think that something was wrong, but it was too late. More than 10,000 Swedish kronor (about $1,000) has been stolen from her account, and the thieves have disappeared into the digital shadows.
"Scammers are very good at making things look legitimate," Bagley said, adding that identifying scams "isn't easy."
Although financial crime has made fewer headlines than the gang-related gun violence surge, it has become a growing risk in Sweden. Outside of its borders, Sweden is now an important country in the fight against telecommunications network fraud, as it has gone further than almost any other country in Europe in abandoning paper money.
Telecom network fraud crime has surged in Sweden, with criminals defrauding more than SEK 1.2 billion in 2023 through scams like Bagley's, double the number in 2021. Law enforcement agencies estimate that Sweden's telecommunications network fraud economy accounts for 2.5% of the country's gross domestic product.
In response to the boom in wire fraud, Swedish authorities have put pressure on banks to tighten security measures and step up their crackdown on tech-savvy criminals, but this is a delicate balancing act. Doing too much can slow the economy, while doing too little erodes trust and hurts legitimate businesses in the process.
Senior Economic Crimes Prosecutor Daniel Larson said sophisticated fraudsters used sophisticated networks of fake companies and forged documents to gain access to Sweden's welfare system, making Sweden a "Silicon Valley of criminal startups."
He added that while the onslaught of armed violence has attracted public attention – between 2012 and 2022, the gun crime rate in Sweden tripled, economic crime is the basis of gang activity and needs to be actively addressed.
"It was a strategic mistake," Larson said. This for-profit crime fuels organized crime and, in some cases, even leads to these conflicts. ”
Sweden began to switch to electronic cash after a surge in armed robbery in the 90s of the 20th century, and in 2022, according to a central bank survey, only 8% of Swedes said they used cash on their most recent purchase. According to the International Monetary Fund, Sweden, like neighboring Norway, has the fewest ATMs per capita in Europe.
The popularity of BankID has played a role in Sweden's vulnerability. The system works similarly to online signatures. If used, the transaction is considered completed and the transaction is executed immediately. It was designed by the Bank of Sweden to make electronic payments faster and easier than handing over a pile of banknotes.
Since it was first introduced in 2001, it has become a part of everyday life in Sweden. On average, this service requires a six-digit code, fingerprint, or face scan for identity verification and is used more than twice a day by every adult Swede, covering everything from filing tax returns to paying for bus tickets.
Initially a product that banks offer to their customers, the use of the technology skyrocketed in 2005 after the Swedish tax authorities adopted the technology as a means of identifying tax returns and received official approval from the government. In 2010, the rollout of BankID on mobile phones further increased usage as the public associated cash with crime.
The Riksbank admits that some of these implications may be too much. Riksbank Governor Eric Seyding told Bloomberg: "We have to be very clear that there are still honest people using cash. ”
BankID is controlled by a consortium of Swedish private lenders, including Swedbank AB, SEB AB, and Svenska Handelsbanken AB. As the government investigates the prospect of providing state-issued digital IDs, a number of changes have been implemented to improve their security.
Björn Johansson, Head of Fraud Prevention at Swedbank Group, said: "The entire banking sector is doing a dedicated job to stop fraudsters, but the police, politics and the telecommunications industry also need to do their part. Representatives for SEB and Handelsbanken declined to comment.
For Bagley, the fact that BankIDs are so common is part of the problem. "It's not really a security measure, it's just another step in using the website," she says, "and you don't really think about what the BankID app might say you're logging into." ”
It's not just consumer scams. Swedish government agencies use BankID to simplify the process of setting up a legitimate business in Sweden, but it also makes it convenient for fraudsters. Some people use fake companies and fake salaries to launder money. Through such programs, organized criminals can turn the proceeds from fraud and drug sales into a tool to obtain bank loans and withdraw money from the welfare system.
Swedish prosecutor Larsson said: "This means that you can take a profit from the crime and then end up with a state pension based on that income." "It's very offensive."
According to the Swedish National Crime Prevention Commission, reported welfare fraud cases have doubled in the past 10 years, from less than 9,000 in 2014 to more than 23,000 in 2023. In an effort to combat crime, the Swedish government this year set up a new agency dedicated to tracking false benefit payments.
As the problem grows, Swedish banks are taking steps to provide additional security, including requiring approval from a trusted second party for large transfers. But in most cases, they are voluntary, and users need to choose to set up a two-stage authorization or defer payments.
Peter Göransson, Senior Security Advisor at the Swedish Bankers Association, said: "We are always looking to find the right balance between accessibility and security. "In some cases, transfers are going to be slower – that's already happening – but that's the world we live in, and I think customers understand that."
This development has led to calls for banks to take greater responsibility when customers are defrauded. Payment service providers only paid about 10% of fees in the second half of 2023, and Sweden's financial regulator said Sweden would do well to follow the UK's lead, which will require banks to pay fees to compensate customers who have been tricked into making transfers starting in October.
Until similar regulations are adopted in Sweden, the chances of users like Bagley getting a refund are slim. She reported the February incident to the Swedish National Consumer Dispute Council and tried to raise awareness through social media to overcome the embarrassment of being deceived.
"I've heard a lot of people tell me 'I've been cheated on and feel so lonely and ashamed,'" she said.