Card fraud at its lowest level for five years

The report published last week by the European Central Bank on card fraud showed that card payments have become more secure due to technological advances and that the share of card transactions that are fraudulent has fallen to its lowest level for five years. In 2011 card fraud accounted for some eight million transactions with a total value of one billion euros in the 32 countries of the Single Euro Payment Area, SEPA*.

In 2011, 5000 fraudulent transactions worth around 900,000 euros were made using cards issued in Estonia. This is equal to 0.002% of all card transactions, which is one of the lowest figures of any member state of the European Union. This means that around three out of every thousand cards issued in Estonia was connected to a fraud, and there were four cases of fraud for every thousand inhabitants, which compares favourably to the 11 frauds per thousand cards and 15 per thousand people in the SEPA as a whole. The most common type of card fraud in Estonia, accounting for 42% of cases, is committed in card-not-present (CNP) payments, which are payments initiated over the internet.

Frauds at automated teller machines (ATMs) accounted for 39% of cases, and those at point-of-sale (POS) terminals for 19%, and these frauds mostly used counterfeited bankcards. Counterfeited bank cards accounted for 95% of the total value lost at ATMs and POS terminals due to fraudulent transactions, with stolen or lost cards used for only 5%.

The number of incidents of card fraud in the SEPA fell by 6.4% in 2011, and the value of the fraudulent transactions fell by 5.8%. Card fraud was less common in the countries of the euro area than in the SEPA as a whole. Fraudulent transactions accounted for 0.036% of the total value of all card transactions, and 0.016% of the total number of transactions, which is the lowest figure for five years. The value of fraud from CNP payments accounted for 56%, or more than half, of the value of fraud, with fraud at POS terminals accounting for another quarter and incidents at ATMs for a fifth. This meant that CNP fraud was unchanged, ATM fraud had increased slightly and POS terminal fraud had declined by around one quarter.

It is recommended that cardholders improve their security by reviewing the limits on their bank cards for cash withdrawals or transactions per day. These limits help reduce the losses from fraud as large transactions cannot then be made with the card and the bank account related to the card cannot be emptied. Victims of card fraud must contact the bank that issued their card immediately. A victim who is not at fault for the fraud will eventually get their stolen money returned.

Card fraud is mostly committed by international organisations and stopping it requires cooperation across Europe through preventative measures and international standards. Central banks, banks and card schemes have made great efforts to prevent card fraud, and they have adopted new measures to make card payments more secure by migrating to the EMV security standard. Cards with magnetic stripes are being replaced throughout the Single Euro Payment Area by cards with chips, which reduce card fraud and copying of cards. Estonia has been particularly successful in this, as all cards issued in Estonia have a chip as well as a magnetic stripe.

Fraud over the internet can be reduced with the use of the 3D Secure system, where an additional code that functions like a PIN code has to be entered when a card payment is made. Banks operating in Estonia have been rolling out this system under the names Verified by Visa and MasterCard SecureCode. The central banks and supervisory bodies of the European Union have set recommendations for payment service providers in order to ensure the security of payments over the internet. Payment service providers have until February 2015 to apply the recommendations.

* The report on card fraud covers all the countries in the Single Euro Payment Area (SEPA), which are the member states of the European Union plus Switzerland, Iceland, Liechtenstein, Norway and Monaco.


The report by the European Central Bank and the central banks of the euro area countries on card fraud describes the trends in fraud. In 2012 information about card fraud was published for the first time. There are 1.3 bank cards per inhabitant in Estonia and 1.4 per inhabitant on average in Europe, with 179 card payments per inhabitant per year in Estonia and 97 on average in Europe. These figures put Estonia in the top five for card use alongside Finland, Sweden, the UK and Denmark. At the same time, the number of card fraud incidents in Estonia is one of the lowest in the European Union, putting Estonia in the top ten for security.

Source: Bank of Estonia

Author: Airi Uiboaid, Eesti Pank Payment and Settlement Systems Department

TV programme suspects two Danish businessmen in Estonia of fraud

Denmark’s TV program Kontant that focuses on consumer issues reported in April that two Danish businessmen Morten Flendt and Oyvind Hjulmand who are residents in Estonia are behind Internet websites that in Denmark and Italy enable users to assess their second-hand cars seemingly for free, but later charge the user EUR 60, writes Äripäev.

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A report about the shadow economy; households with business income

This paper estimates the extent of income underreporting by households with business income relative to households of wage earners in Estonia. The paper uses a modified version of the methodology pioneered by Pissarides and Weber (1989). The extent of income underreporting is estimated by comparing food Engel curves for households with and without business income. The baseline result is that the reported income of households with business income above 20% of total income must be multiplied by 2.6 in order to attain the same propensity of food consumption as households of wage earners. Households with business income above 0 but below 20% also underreport income, but to a lesser extent. The estimates are higher than those found for developed countries, but consistent with other studies of the shadow economy in transition countries. The analysis also shows that the presence of business income is a better indicator of income underreporting than a reported status of self-employment.

Read more from :

“6/2013 Merike Kukk, Karsten Staehr. Income Underreporting by Households with Business Income. Evidence from Estonia

Working Papers of Eesti Pank No. 6/2013

EU: Estonia’s small size creates corruption risk

A new report on the risks of using EU funds shows that corruption in Estonia is becoming more and more difficult to discover as more decisions are made on the political level, writes Postimees.

According to EU’s anti-fraud agency OLAF report, by the end of 2012, 339 violations or suspected violations of EU funding rules were detected in Estonia in the total amount of EUR 35m.

The report highlighted that the biggest risk of corruption is at the top of the system that distributes EU funding, ie on the political level, as well as on the lowest level, ie actual recipients of EU funding.

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Russian businessman acquires hunting estate of a former KAPO officer

Alexander Tarasenko, a 38-year-old businessman from Moscow acquired at the action the real estate that belonged to former prominent KAPO official Indrek Põder who is convicted of bribery, writes Eesti Ekspress.

Tarasenko’s company Alextar is the new owner of 1.3 hectares of residential land that includes a hunting estate plus 10 hectares of agricultural land.

The state auctioned the real estate because Põder was ordered to pay the state 180,000 euros in damages.

Read more about the criminal background of Põder from BBN

Lithuania is the EU bribery leader

The level of bribery in Lithuania has dropped over the last three years, but the country remains the leader in bribery among EU member states, writes The Lithuania Tribune with reference to a Transparency International survey.

Twenty-six per cent of people in Lithuania admitted to have given a bribe over the last year to at least one of eight providers of public services, including the education sector, courts, healthcare institutions, the police, registration services and services issuing permits, utilities, the Tax Inspectorate or land-use services.

Compared to 2010, the number fell by eight per cent, down from 34 per cent.

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Estonia, a promised land of black sugar

Estonian sugar traders and tax authorities suspect that up to a half of sugar sold in Estonia may be either smuggled or used in VAT fraud, writes Äripäev.

The tax authority estimates that last year the state lost around EUR 0.2m from illegal sugar trade.

Sugar trader Alo Süvari from Montemar says that trade statistics shows that sugar imports to Estonia have decreased by a third in the last two years.

„I estimate that out of 40,000 tons of sugar imported to Estonia every year, black sugar could account for up to 15,000 tons,” he said, adding that his company has been offered to buy the company’s own sugar at prices that are lower than his sales price.

Sirje Potisepp, head of the Estonian association of food producers, says that black sugar market could be one reason why the price of sugar in Estonia is notably higher than in Europe.

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Estonian tax authority zooms in on applicants for VAT registration

Estonian tax and customs board says that it is taking a new look at the companies which apply for registration in the VAT registry because there have been more cases where criminals planning VAT fraud have taken over otherwise honest companies after they have registered for VAT, writes Postimees daily.

Usually the new owners are people who have been blacklisted because of involvement in earlier VAT fraud and would otherwise not be accepted for VAT registration.

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Shadow economy accounts for 19% of Estonian GDP

Shadow economy made up 19.2% of the Estonian economy last year, shows a pan-Batic survey made by SEB Bank and SSE Riga, a business school. Europe’s average is about 15%.

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Tallinn city officials were bribed by developers

Äripäev writes that a comparison of bribes paid to Ivo Parbus, former adviser to the City of Tallinn, and approvals of detailed plans in Tallinn enables to clearly link bribes to the handling of the detailed plan.

According to the paper, the number of detailed plans which Ivo Parbus and his partner in crime Elmar Sepp helped to push through in the City is simply unbelievable.

According to the report of the prosecution, only a fraction of all cases where developers seem to have paid a bribe to Parbus in exchange of speeding up detailed planning procedures have gone to court because national security agency KAPO started wiretapping Parbus only in the latter part of 2008.

According to the accusation, the total amount in bribes was over 60,000 euros.

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