UK struggles to bring online fraud under control – POLITICO

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Online investment fraud in the UK might as well be legal, and scammers know it.

As authorities lose hope of curbing the growing incidence of police fraud, activists, the financial industry and market supervisors are calling for new laws to impose liability on online giants such as Google for suffocate the crooks.

But the UK government is hesitant about additional regulations for internet platforms, and the impact of existing controls remains limited. In the meantime, online scams involving bogus companies touting unrealistic wealth have exploded during the pandemic as people remain stuck at home worried about their finances.

“We do not have the capacity or the capacity of the police to properly investigate fraud,” said Anthony Stansfeld, the police and crime commissioner for the Thames Valley region. Stansfeld was involved in an investigation into a gang of fraudsters in Reading who, with the help of an insider, has been the prey for years of customers of the banking and insurance company HBOS.

He estimates that there could be around £ 100 billion of consumer fraud in the UK each year, including online investment scams. As the UK needs to “devote tremendously more resources to its monitoring,” Stansfeld said, “there should be more pressure on online service providers to do the right thing.

The Financial Conduct Authority issued 1,053 public warnings about the solicitation of unauthorized investments last year, a 82 percent jump from 2019. The real picture is probably orders of magnitude higher: law enforcement estimates that less than 20% of fraud is reported, while only 1 incident in 500 is for follow-up. Fraud has grown to such an extent in the UK that it is becoming a threat to national security, according to to the Royal United Services Institute think tank.

Anyone can be targeted, including Pat McFadden, the Labor MP for the party’s financial services policy. In an interview, McFadden said he and his wife regularly receive suspicious emails, texts and online advertisements that “seem genuine” at first glance. “It’s on an industrial scale, so even if 1 in 100 people respond, there will be a large number of victims,” ​​he said. “The government needs to take this very seriously.”

The opposition MP called for financial damage to be added to the upcoming online damage bill, which is due to be presented to parliament in the coming months to set new strict guidelines for removing illegal content such as child sexual abuse or terrorist material.

“My personal opinion is that this is a huge problem. We need online service providers to take responsibility and work in a way that minimizes these scams, ”said Mel Stride, the Conservative leader of Parliament’s Treasury Committee.

But according to Stansfeld: “There is a strange mentality [toward fraud] in the building […] The government does not recognize the magnitude of the problem. “

Officials said the government was not planning to change the online damage bill or take any other swift legislative action, arguing that the online damage bill was not suited to tackling the issue. fraud because it offers strictly with user-generated content rather than paid. Instead, ministers review advertising regulations.

“We recognize concerns about the growing scale and complexity of online scams and fraud, and we continue to work closely with industry, regulators and law enforcement partners. to prosecute fraudsters, eliminate vulnerabilities they exploit and make sure people have the information they need to spot and report scams, ”said a spokesperson for the UK’s Department for Digital Culture and Media and sports. The Interior and Treasury Ministry declined to comment.

Attention the buyer

The hands-off mantra long championed by UK authorities is no longer feasible due to the increased sophistication of online criminals, said Neena Bhati, campaign manager for Which ?, The consumer advocacy group.

“People assume that the platforms verify the content of the ad, but they don’t,” she said, adding that “people believe the brands they trust,” like Google. “It’s not just financial loss, but mental health effects,” Bhati said, citing his own work with victims who felt deep shame, hopelessness and anxiety after being swindled. “We need urgent proposals to give more responsibility to the platforms.”

The Financial Conduct Authority agrees that it seeks to contain a rising tide.

“Online platforms, such as search engines and social media platforms, are playing an increasingly important role in exposing consumers to the risk of harm, exposing them to advertisements for products financial, ranging from scams and promotions of high-risk investments to false or misleading. advertisements, ”said a spokesperson. “We have been in dialogue with Google for some time, and while some progress has been made, they can do a lot more to tackle consumer harm.”

FCA chief Nikhil Rathi argued for amending the online damage bill to cover financial damage when testifying to MPs on March 1.

“The one thing that I don’t think would be a panacea, but that would help, is getting investment fraud included in the online damage bill,” Rathi said. “We don’t think the other solution offered around the online advertising program really matches the urgency of the problem.”

However, nodding at the opposition, Rathi noted: “There is a lobby that says this could undermine the competitiveness of the UK tech sector.”

Stating that protecting consumers and credible financial services operators “is a priority” for Google, a spokesperson for the company said it “recently updated our policies to allow verification of companies making the promotion of financial services in the United Kingdom. When ads do not comply with our policies, we take action. to remove them. “

Google current policies state that financial advertisers must provide additional information about their business, and Google reserves the right to “suspend” suspicious accounts while it checks.

But the fact that bogus ads can last up to 21 days online means the scams continue unhindered, according to one. investigation from which? released in November. Google has announced plans to verify the identity of UK advertisers in 2018, but has yet to adopt them.

Meanwhile, the EU plans to strengthen its protections through a digital services law, proposed in December in part to protect people from harm online. However, this has been criticized by several governments and consumer associations for not going far enough, including in the fight against fraudsters.

Distorted economy

Scams distort the functioning of legitimate industry, said Liz Field, chief executive of the Personal Investment Management and Financial Advice Association (PIMFA), which represents the companies most commonly spoofed by online fraudsters.

As a safety net for victims, the UK requires financial firms to fund the Financial Services Compensation System, which pays those who have lost money, including through fraud. The FSCS waits overall, complaints and reimbursements will increase in 2021, resulting in a 48% increase in contributions for the next fiscal year.

The rise in fraud is also driving up premiums for compulsory professional liability insurance for businesses. Such trends could force smaller financial firms to go out of business, making it more likely that savers will turn to scam artists announcing lower fees and higher returns, Field said.

“Good businesses pay for bad businesses,” she says. “This is doing untold harm to consumers and the cost to our member companies is appalling.”

PIMFA members are expected to make a total of £ 9 billion in FSCS contributions this year. Some individual companies are planning to almost double their contribution from the previous year, she said. “The system is flawed and needs to be thoroughly reviewed,” Field said.

“The impunity and the scale are devastating for public confidence in financial services. People cannot trust online advertisements, ”said Mark Taber, a professional investor and consumer activist who regularly provides FCA with information about scams, which he also posts on social media to raise awareness. public.

Well-known investment advisory firms such as Quilter, one of the the biggest, are among those cloned in online scams.

“Fraud has taken up a lot of our time last year,” said Debbie Barton, the firm’s financial crime compliance manager, listing information exchanges with law enforcement and regulators. , engagement with victims, and industry-wide coordination between jobs.

To protect its reputation, Quilter offers victim counseling services, Barton said. The problem, she says, “is not going to go away until websites are unable to profit from scam ads and scammers start to be put behind bars.”

This story has been updated to clarify details of Quilter’s activities.

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