Tech companies should be forced to protect their users more effectively against online fraudsters, MPs have been urged as the police conceded billions of pounds could have been lost to pension scams.
Senior police officers and regulators made the appeal to MPs on Wednesday as they said cases of online investment fraud had grown significantly during the coronavirus pandemic while people were more financially vulnerable and spending more time at home.
In recent years, police and regulators have stepped up efforts to protect savers against the growing risk of investment fraud, where individuals are hoodwinked by promotions into placing their cash into “too good to be true” investment opportunities.
“In the last 12 months, there were 12,000 cases [of investment fraud] reported and that is a significant increase on recent years,” Mark Steward, director of enforcement and market oversight at the Financial Conduct Authority, told a House of Commons work and pensions select committee hearing on investment scams.
“Covid and lockdown has placed people under more financial pressure.”
Mr Steward told the committee that there had also been an increase in online marketing of what looked like genuine investment opportunities but were in fact fraudulent.
“This has really sped up in the past two or three months, perhaps because of people spending more time at home, or more time online,” he said.
Mr Steward said that, unlike with television companies or newspapers, there were few actions regulators could take against a tech or social media company which carried advertisements promoting investment scams.
“Social media is largely unregulated,” he told the committee. “There are few gateway controls on the admission of advertising into either the search engines or Twitter or Instagram, for that matter. This is something that concerns us.”
The FCA had started a dialogue with social media companies, Mr Steward said, on ways to weed out investment fraud, but while the regulator’s initiative had been “positively” received, it had failed to reduce the number of detected cases of online scammers.
In 2019, Facebook launched a dedicated tool to report scam ads after Martin Lewis, a high-profile consumer campaigner, issued court proceedings against the social media giant after a year in which more than 1,000 scam adverts abusing his name or image had appeared on the platform.
Google has a policy requiring authorisation for advertisers to market cryptocurrency exchanges, while banning the promotion of token sales and cryptocurrencies themselves. More broadly, it requires marketers to provide “legitimate contact information for a physical location” of the business being promoted and requires advertisers to make specific disclosures in advertisements for loans and loan modification.
Twitter declined to comment. Facebook and Google did not respond to a request for comment.
Losses from reported pension fraud amounted to around £30m over the past three years, Nicola Parish, executive director of frontline regulation at The Pensions Regulator, told the MPs.
But Commander Clinton Blackburn, national co-ordinator for economic crime with the City of London Police, told the hearing it was “plausible” that pension scam losses could be in the billions of pounds because so much crime went unreported.
The government has proposed measures, through the online harms bill, to force tech companies to improve online safety for tens of millions of their users, but currently this does not contain provisions related to investment fraud.
“We certainly see a good case for investment fraud to be included as an online harm,” Mr Steward told the committee.
Cdr Blackburn added that said it was a “missed opportunity” that investment fraud had not been included in the draft legislation.
“The online world is an increasing vector for fraud,” he said. “The online world needs to do more about it and we all think some form of regulation is necessary.”
Additional reporting by Hannah Murphy in San Francisco