The Government has bowed to intense pressure to clamp down on tech giants raking in money from scam advertisers in its new online safety law.
It is a victory for industry and consumer groups, politicians and regulators who have long demanded action against harmful advertising, which lures unsuspecting savers and investors to hand over cash to fraudsters touting fake or cloned deals and products.
After resisting calls for action for more than a year, the Government announced a new legal duty in a forthcoming bill that will force the largest and most popular social media platforms and search engines to prevent paid-for fraudulent adverts appearing on their services.
Intense pressure: The finance industry and consumer groups, politicians and regulators have long demanded action against paid-for scam ads on top internet and social media sites
‘The change will improve protections for internet users from the potentially devastating impact of fake ads, including where criminals impersonate celebrities or companies to steal people’s personal data, peddle dodgy financial investments or break into bank accounts,’ says the Department for Digital, Culture, Media & Sport.
‘Separately, the government is launching a consultation on proposals to tighten the rules for the online advertising industry.
‘This would bring more of the major players involved under regulation and create a more transparent, accountable and safer ad market.’
The Financial Conduct Authority had backed MPs, the finance industry and crime experts in raising the alarm about soaring cases of sophisticated fraudsters ‘cloning’ their legitimate operations and products to steal people’s cash.
The regulator, which at one point threatened to take legal action against Google if it didn’t do more to tackle online fraud, has now welcomed news the Online Safety Bill will require the largest platforms to tackle fraudulent advertising.
Criminal gangs are using legit-looking clone sites to steal ‘big money’ – how do you protect your cash?
Phil Rolfe, a financial crime expert, explains the steps to take to guard against being scammed here.
Clone fraud: Criminals are luring investors to fake comparison sites touting bogus products in order to steal their cash
Mark Steward, executive director of enforcement and market oversight, says: ‘We have been clear about the need for legislation and appreciate the Government’s positive engagement on this.
‘We look forward to working closely with the Government and regulatory partners as they finalise and implement the details of the draft bill.’
The Government has also faced pressure from celebrities, such as Martin Lewis, whose names and images were touted in fraudulent adverts to fool unsuspecting customers that financial products were legitimate and reputable.
Lewis, founder of MoneySavingExpert and the Money and Mental Health Policy Institute, says now: ‘I am thankful the Government has listened to me and the huge numbers of other campaigners – across banks, insurers, consumer groups, charities, police and regulators – who’ve been desperate to ensure scam adverts are covered by the Online Safety Bill.
‘We are amidst an epidemic of scam adverts. Scams don’t just destroy people’s finances – they hit their self-esteem, mental health and even leave some considering taking their own lives.
‘Now we and others need to analyse all elements of this new part of the Bill, and work with Government and Parliament to close down the hiding places or gaps scammers can exploit.’
Culture Secretary Nadine Dorries says: ‘We want to protect people from online scams and have heard the calls to strengthen our new internet safety laws.
‘These changes to the upcoming Online Safety bill will help stop fraudsters conning people out of their hard-earned cash using fake online adverts.
‘As technology revolutionises more and more of our lives the law must keep up. Today we are also announcing a review of the wider rules around online advertising to make sure industry practices are accountable, transparent and ethical – so people can trust what they see advertised and know fact from fiction.’
A coalition of 14 consumer groups, charities and industry bodies had called on the Government to change the ‘flawed’ bill.
The coalition spanned industry bodies like UK Finance, the Investment Association and the Association of British Insurers, groups like Victim Support, Age UK and Which?, and James Thomson, chair of the City of London Police Authority Board.
What do the tech and online advertising industries say?
Tech UK, the trade body for the UK tech industry, declined to comment until the new version of the bill is published. Its previous response on the issue can be found here.
‘Cloned’ firm fraud
The FCA says people should take the following steps to protect themselves.
* Only use financial firms that are authorised by the FCA – you can check its register here. The watchdog advises people to access the register direct from its website, rather through links in emails or on a firm’s website, as this might be part of the scam.
* Always double check the ‘url’ – the website address you input to reach a homepage – and contact details of a firm to ensure they match those of the genuine one.
* Check the FCA’s warning list of cloned firms it has issued alerts against here.
Read more here about cloned firm fraud.
Jon Mew, chief executive of the industry body for digital advertising IAB UK, says it welcomes the opportunity to contribute to a future regulatory framework for digital advertising – the Online Advertising Programme – through an evidence-led process that builds on the strong industry standards already in place.
‘Together with government, regulators and law enforcement bodies, the UK digital advertising industry wants to play its part in restricting, detecting and disrupting scam ads,’ he went on.
‘However, the regulatory coherence that we believe the OAP can deliver on this and other issues is undermined by provisions on “fraudulent advertising” being added to the Online Safety Bill.
‘The decision to duplicate the focus on scam ads across both programmes creates unnecessary regulatory fragmentation and risks constraining proper policy development.
‘To announce legislative changes on the same day as launching such a wide-ranging consultation on the sector undermines the purpose of the OAP and could pre-empt its outcomes.
‘The Government has said that the OAP will aim to holistically review digital ad regulation and consider a range of potential policy responses. Today’s announcement makes that process more difficult.
‘We are also concerned that the widened scope of the OSB has not been subject to industry consultation and that it could have unintended consequences for legitimate advertisers – particularly small businesses – if it is applied across the board.
‘The approach set out today seems at odds with the principles set out in the Government’s Plan for Digital Regulation, which emphasises the importance of drawing on industry expertise to develop effective regulation, and of a coherent and streamlined regulatory landscape.’
What do MPs say? Important first step to protect people from ‘devastating’ harm of scams
Backbench MPs issued two reports urging the Government to include financial ads in the forthcoming Online Safety Bill, but their calls were rejected.
Stephen Timms, chair of the work and pensions committee, says: ‘We are pleased that nearly 12 months after we first called for the inclusion of paid-for adverts in the proposed legislation, the Government has finally taken this important first step to protect people online from the devastating financial and psychological harm that scams have been causing.
‘Over the last year, the committee, along with a growing number of voices from Parliament and beyond, have been warning of the pernicious effects of online scams.
It is only right that those internet giants, which have been profiting from hosting fraudulent adverts, should be compelled to take action
Stephen Timms MP, chair of the work and pensions committee
‘It is only right that those internet giants, which have been profiting from hosting fraudulent adverts, should be compelled to take action.
‘We look forward to seeing more details on how the proposals will work when the Bill is introduced to Parliament.’
What do the police say? There were 35k reports of scam online ads in past year, and £400k was lost
The City of London Corporation’s Police Authority Board and the City of London Police welcomed the Government’s decision to include paid-for advertising in the Online Safety Bill, after they had both campaigned for the measure.
A City of London Police Authority Board spokesperson says: ‘It has long been our firmly held view that people must be protected from scam adverts, and it is hugely encouraging that the Government is moving decisively to clamp down on them.
‘Targeting criminals, reducing crime, and helping prevent people from falling victim to fraud and scams are at the heart of this new legislation which, increasingly, feels more comprehensive.’
Service delivery director at the City of London Police, Chris Bell, says: ‘We are delighted that the Government has responded to calls to include paid-for advertising in the Online Safety Bill.
This was a vital and missing piece of the bill, offering greater protection to the public from criminals intent on deceiving them into losing their money
Chris Bell, City of London Police
‘This was a vital and missing piece of the Bill, offering greater protection to the public from criminals intent on deceiving them into losing their money.
‘It is estimated that at least 35,000 reports into Action Fraud over the last year were connected to fraudulent online advertising, with victims losing a total of nearly £400,000 as a result.’
The police add that as well as substantial financial loss, fraud causes significant harm to victims of crime, many often highly vulnerable, and in many cases that harm is life-changing.
What does the finance industry say? ‘Thrilled’ at victory in long campaign to protect fraud victims
Wealth management firm Quilter warned in late 2020 that fraudsters were impersonating financial firms to trick people out of cash using fake websites and paid adverts on search engines.
It pointed out that the burden was on individuals to protect themselves, by detecting copycat websites and reporting them to online platforms and the regulator. This takes time, during which other people are exposed to the same scam.
Quilter highlighted that there was no legally enforceable system to compel search engines and social media platforms to remove fake websites and adverts which clone financial services firms.
It called back then for the Government to consider including financial scams within its forthcoming ‘online harms’ legislation, which was then at the consultation stage, but its call was not heeded until now.
Today Debbie Barton, financial crime prevention expert at Quilter, says: ‘We are thrilled that after years of campaigning by us and many others, we finally have confirmation from the government that they will act on impersonation scams through concrete legislation to protect consumers.
‘For far too long, scammers have been allowed to operate with impunity in an online world in which consumers have few protections.
‘It is far too easy for scammers to steal the identity of a well-known celebrity, or impersonate the brand of a well-known financial services firm, host a website with a domain located outside the UK, and use a cheap advert to reach potentially thousands of unsuspecting individuals.
‘The Government wanted to just include user-generated scams, and not paid-for adverts, but this wouldn’t have been enough.
‘In fact, it would have encouraged scammers to just pay for an advert to avoid the new legislation. Now, the legislation will cover scams from all sources.
‘In doing so, the bill will ensure that technology companies face a new legal duty to tackle harm caused as a result of fraudulent content on their platforms.’
Insurance giant Aviva is another firm that was early in being willing to openly press for action against scam ads cloning legitimate financial providers and products.
It teamed up with financial crime expert Phil Rolfe to raise awareness of investment clone fraud, and also conducted public polling which found nine in 10 people backed calls to force tech giants to vet online ads against fraud.
Rob Lee, director of fraud prevention at Aviva, says: ‘The news today that pre-paid fraudulent advertising will now be within scope of the Online Safety Bill comes as a welcome relief to all those who have campaigned so hard to help protect consumers from online fraud.
‘We have seen first-hand the often devastating impact fraud has on the financial and mental wellbeing of victims.
‘We will of course need to examine the detail of the Bill when it is presented to Parliament for further scrutiny, to ensure that consumers are adequately protected at every stage of their online journey, but this milestone represents a significant shift in the right direction.
‘The legislation needs to tackle the problem of financial scams and misleading financial promotions. Our concern is centred on the sharp practices employed by fraudsters, which mislead consumers and put them at serious risk of financial harm.’
Lee added: ‘There is a clear mistrust of financial services adverts online. However, there is no legal responsibility for technology firms to verify the legitimacy of the companies which pay them to publish adverts on their platforms.
‘This potentially leaves millions of internet users exposed to unscrupulous adverts.’
Kate Smith, head of pensions at Aegon, says: ‘The pension industry spoke with one voice campaigning for inclusion of fraudulent paid for adverts, in addition to user-generated content, to be included in the Online Safety Bill.
‘We’re therefore absolutely delighted that the government has listened to our concerns and will cover scams originating from all sources.
‘Exclusion of paid-for adverts would merely have led to scammers taking advantage of this loophole.
‘Scams are constantly evolving and it’s important that legislation moves with the times, providing greater protection to protect people’s hard-earned cash, investments and pensions.’
Myron Jobson, senior personal finance campaigner at Interactive Investor, says: ‘It is difficult to use the internet without encountering something that looks like a scam advert – and there are also malicious ads that aren’t easily discernible to contend with, which makes surfing the web a minefield.
‘Any effort made to crackdown on the scourge of scam ads is welcome, but it will be nigh on impossible to nip every financial scam in the bud.
‘The challenge will be creating a consistent and robust regulatory framework that forces all gatekeepers of the internet (social media companies included) to pull up their socks when it comes to tackling financial scams.
‘The success of the new measures will be determined by the prevalence of scam adverts and the severity of enforcement action taken against offenders.
‘Scams were once easily recognisable. From the ill spelt unsolicited emails from someone from afar purporting riches to share, to notifications of lottery wins, fraudsters are now adopting increasingly sophisticated methods to swindle people out of their hard-earned cash.
‘With the numbers seemingly getting worse, not better, the new measures are welcome, but far more needs to be done.
‘We all need to remain on our guard against scams. Never trust anyone wanting personal information and remember: If it seems too good to be true then it is indeed too good to be true.’
In late 2020, industry lobby group the Investment Association warned it suspected organised criminals were behind a massive rise in cases of sophisticated fraudsters ‘cloning’ their legitimate operations and products to steal people’s cash.
Today, chief executive Chris Cummings says: ‘We’re delighted that the Government has listened to industry and consumer group calls to tackle fraudulent paid-for adverts on social media and search engines in the Online Safety Bill.
‘Clamping down on these fraudulent adverts will help protect people from losing their hard-earned money to criminals. We hope the bill will now make timely progress through Parliament.’
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