Sweden’s move to ditch cash has created a surge in fraud

After receiving a couple of error messages, she started thinking something was wrong, but it was already too late. Over 10,000 Swedish kronor (€890) had been siphoned from her account.

“The fraudsters are so skilled at making things look legitimate,” said Bagley, who was born after BankID was rolled out out in 2001. “It’s not easy” to identify scams.

Sweden’s surge in online fraud

Although financial crime has garnered fewer headlines than a surge in gang-related gun violence, it’s become a growing risk for the country. Beyond its borders, Sweden is an important test case on fighting cashless crime because it’s gone further on ditching paper money than almost any other country in Europe.

Online fraud and digital crime in Sweden have surged, with criminals taking 1.2bn kroner in 2023 through scams like the one Ms Bagley fell for, doubling from 2021.

Law-enforcement agencies estimate that the size of Sweden’s criminal economy could amount to as high as 2.5% of the country’s gross domestic product.

To counter the digital crime spree, Swedish authorities have put pressure on banks to tighten security measures and make it harder on tech-savvy criminals, but it’s a delicate balancing act. Going too far could slow down the economy, while doing too little erodes trust and damages legitimate businesses in the process.

Sweden’s switch to electronic cash started 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, according to a central bank survey.

Along with neighbouring Norway, Sweden has Europe’s lowest number of ATMs per capita, according to the IMF.

The prevalence of BankID plays a role in Sweden’s vulnerability. It works like an online signature.

If used, the transaction is considered a done deal and is executed immediately.

On average, the service — which requires a six-digit code, a fingerprint or a face scan for authentication — is used more than twice a day by every adult Swede and is involved in everything from filing tax returns to paying for bus tickets.

For Ms Bagley, the fact that BankID is so commonplace is part of the problem.

“It ends up not really being a security measure, but just another step in using a website,” she said.

“You don’t really think twice about what the BankID app might say you are logging into.”

It’s not just consumer scams. Government agencies have adopted BankID to make it easy to set up legitimate businesses in Sweden, which has also enabled fraudsters. Some have used fake companies with phoney payrolls to launder money.

Through such schemes, organised criminals can use income from fraud and drug sales to get bank loans and extract payments from the welfare system.

Daniel Larson, a senior economic crime prosecutor, said: 

That means you can generate profits from crime and then ultimately get a state pension based on that income. That is extremely offensive. 

Reported cases of benefit fraud have doubled in the last decade, from just under 9,000 in 2014 to over 23,000 in 2023, according to the Swedish National Council for Crime Prevention.

In its efforts to clamp down on crime, the government set up an agency focused on tracking erroneous welfare payments.

As the scale of the problems grow, banks are introducing measures that will allow additional layers of security, including requiring approval from a trusted second party for large transfers. But for the most part, they’re voluntary, with users needing to opt in to set up two-stage authorisation or delay payments.