Thanks to the cashless economy, fraud goes electronic

In recent years, cash has received more attacks than throughout its entire history. More and more countries are going ‘cashless’, big banknotes are being scrapped off in the names of ‘security’, ‘counter-fraud’ and ‘anti-terror war’… But if you look at the figures, the problems remain, they are just going electronic.

In January 2016, even the game Monopoly, abandoned its banknotes in a new ‘contactless version’ (1) symbol of an entire society slowly abandoning its cash money without fully understanding the consequences.

In May, the Euro (€) 500 note was abolished to fight ‘terrorism, money laundering and fraud’ according to the New York Times (2). The paper reported that the €500 note was used to move money across boarders and by terrorists, drug cartels and many more criminals. The drumbeat for the ban, NYT said, came after the terrorist attacks that hit Paris in November and Belgium in March.

The problem is that no link was established between the use of cash and criminal activities. Among the weapons and explosives used in the Paris attacks, none seem to have been bought using cash. The €500 was essentially used for hoarding (around 75% of these notes in circulation rarely showed up to the banks according to the European Central Bank) and therefore, if hoarding Euros is now much more complicated, online fraud seems to be doing very well.

In the recent Panama papers scandal most of transactions were made from a bank account to another directly through wire transfer to the point that cash wasn’t accepted in some of the “tax havens’ banks” (3)

Most of the fraud today seems to be online based. Sweden is foreseen to be one of the first completely cashless countries in the next decade. The Swedes have already diminished greatly the use of cash. Many stores, museums and even banks aren’t accepting cash any longer. Yet in 2014, the number of electronic-fraud cases soared to 140 000 which was unprecedented in the small Scandinavian kingdom. It’s more than double the number of what fraud was a decade earlier, Sweden’s Justice Ministry reported.

“It might be trendy”, Bjorn Eriksson, an ex-director of the Swedish police force and the former president of Interpol, told the New York Times (4) “but there are all sorts of risks when a society starts to go cashless”. Eriksson is now trying to change the government’s mind about making Sweden become the first cash-free nation, and more and more Swedes are raising their voices against the change.

As cash is being scrapped off to fight criminality, many are now realizing how electronic transactions leave behind a trackable trail which raises privacy issues. “Sweden has always been at the forefront of technology, so it’s easy to embrace this,” Jacob de Geer, a founder of iZettle, the maker of a mobile-powered card reader, told the New York Times. “But Big Brother can watch exactly what you’re doing if you purchase things only electronically. You don’t have to be a criminal to want your privacy to be respected and what you do with your money should be kept a secret if you want it to be… but in a cashless society, that isn’t possible” said Eriksson

Meanwhile, cybercrime and online fraud are in the rise. In England and Wales alone, data showed that in 2015, over 3.8 Million adults were victims of some form of online fraud according to figures in the Crime Survey for England and Wales.

In addition, the data showed an estimated 2.5 million incidents categorized under the Computer Misuse Act, where the victim’s computer or other internet-enabled device was infected by a virus or where a victim’s email or social media account had been hacked.

“Today’s crime figures for the first time show that fraud and cybercrime are the most prevalent crimes committed against victims in England and Wales” said Adrian Leppard, commissioner of the City of London Police. “Fraud and cybercrime affect every community in the country and do not discriminate by social status or geographical location”.

Thanks to the new cashless societies, where it is more and more difficult to use cash every day, even the most quiet countrysides where robberies were inexistent are now being touched by online crimes just like the big cities.

If we look at the “overall non-internet crime”, we see that the tendency is the same in most countries. We are reaching the lowest levels of incidents and theft offenses since the 80s (regardless of the efforts of the governments to go cashless or not).

Each year the use of cash is becoming safer and the use of electronic and online payments a little more dangerous for the users. Yet more and more countries are going cashless and nothing seems to be able to stop them, even the disapprobation of their citizens. The next years should be crucial to determine if cash becomes forbidden and therefore something from the past or if, finally, it remains a durable payment option.

  1. Monopoly abandons the cash economy and goes contactless, Payment Eye, February 17th 2016
  2. Europe says goodbye to €500 bill, Pymnts, May 5th 2016
  3. The Panama papers: what is a tax haven?, John Divine, Money US news, April 19th 2016
  4. Sweden shifts toward a cashless economy despite rising risks of electronic fraud, Morgan Winsor, International Business Times, December 16th 2015