European community nations now have a single currency, with the exception of the UK. So this particular scam is not a concern within the EU any longer. However, outside of the single EU currency sphere, and especially in countries with currencies that are of low echange rates compared to US Dollars, Euros and British Pounds Sterling.
I usually exchange currency at a hotel exchange or bank. I use hotel exchanges for convenience, banks if I'm exchanging a large amount of currency, getting a cash advance on a credit or debit card, or cashing travellers cheques. Unfortunately it isn't always convenient to use a bank, if one can even be found that's able to do currency exchanges. Some countries restrict which banks can trade in foreign currencies. Likewise, not every hotel offers currency exchange services. The option then is to pay in dollars, running the risk of paying an even worst exchange rate, or seeking out a private currency exchanger.
The first draw back to exchanging money with locals, even businesses, is that you may be breaking local laws. The second obvious draw back is that you run the risk of being cheated or outright robbed. Ironically, if you're robbed or cheated while buying local currency in a country that forbids private currency trading, you could be charged with a crime. This Catch 22, victims being unable to report a crime because they too broke the law, makes it advantageous for crooks to operate currency exchange scams in countries where trading in foreign currency is illegal. Literally, they can't be reported without the victim confessing to a crime themselves. Worse, it's often a more serious crime to be illegally trading in currency than it is to be a thief.
Besides the risk of being robbed or cheated, there's also the risk of being victimized by pickpockets and slight of hand artists. Pickpockets know who trades in foreign currency, so stake them out. They keep a close eye on where tourists place the currency they just acquired so it can be stolen. Worse, some pickpockets are even working in partnership with the currency traders who make sure the pickpocket knows which tourist is carrying worthwhile amounts of cash.
Slight of hand currency exchange scams are much more sophisticated than pick pocketing, and are becoming more common. Slight of hand tends to victimize mostly those from more affluent countries, but not because the pickings are better. It's because of the way most people from countries with more valuable currency count their money... slowly, and one bank note at a time. I watched currency buyers in Romania, Uzbekistan, Russia and other countries where I've bought local currency from private sources. They count notes so fast I could barely see their fingers moving. It makes sense that the locals count bank notes so quickly. There are often hundreds of notes to be counted for small purchases, and other shoppers lined up to pay. This rapid method of counting currency notes is a talent I tried to duplicate with no luck. It entails folding bank notes over and through fingers so that the corners can be folded over one at a time and counted. It must take years of practice to count money using this method, and being able to do so is the key to how this slight of hand scam works.
What happens during a slight of hand scam is that you're offered a very good exchange rate, which of course you agree to. You take out your money and count it out onto a table in front of the money changer, who counts his in front of you. Of course you can't keep up with his counting, but he was easily able to count yours. You look doubtful when asked if all is acceptable to you, so you're offered the opportunity to count the currency you're buying for yourself. It's found to be short, so the difference is counted out into your hand, slowly, note by note. Finished, the money changer sweeps up the currency you counted out and stuffs it into his pocket as he turns to leave, looking all about for police to reiterate that the transaction you just made is illegal. You add the amount counted out into your hand to the amount on the table that you'd already counted and leave too.
You probably won't notice for some time that you don't have all the local currency you should have. When you do notice you are short of cash, you'll probably assume you lost it or were shortchanged somewhere along the line by a merchant. You were shortchanged alright, but by the person you bought the local currency from.
When the money changer was slowly counting out the bills into your hand to make up for the amount needed to reach the promised currency exchange rate, he palmed the stack of notes on the table, replacing them with currency of much lower value. Only the one note on top was in the same denomination that you counted. The palming of the one pile and replacing it with the other is done while your attention is focused on the bills being counted into your hand. This is a standard illusion technique used by magicians, have the audience's attention on something other than where it needs to be to discover how the trick is done.
This scam was tried on me once, almost successfully. Unfortunately for the money changer I was on business and had been assigned a driver who knew the trick. He grabbed all of the money from the bench it was being counted out on and handed it to me. The driver pushed the money changer aside as we got in his car, explaining that he'd take me to where I wouldn't be cheated. The scammer was literally begging to have his money returned and would not let go of me. I don't like making trouble in countries I'm a guest in, even when I'd be forgiven for doing so. I kept my money and handed the foreign currency buyer his and left. Later I saw him in the hotel, where he seemed to be a regular fixture. We came to an unspoken understanding, he stayed clear of me and I did not interfere with his "business". I figured he was paying someone in the hotel to be permitted to work the place, and probably paying dues to one of the local organized crime groups I wouldn't want to run afoul of. I learned long ago that when on someone else's playing field, where I don't know the rules or the players, the best approach is to make it clear I'm not a victim, but I'll not be a problem either.
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