Britain’s Financial Conduct Authority (FCA) sweeps the internet several times a day to check for online scams and then issue warnings within 24 hours, an official of the financial regulator told a Parliamentary committee.
The FCA last year issued 1,200 consumer warnings about scams advertised via social media platforms by fake companies not regulated by the watchdog, double the amount in 2019. This year’s figure has already topped 600.
Those warnings have become a “key weapon” in the FCA’s fight against a surge in financial scams after more people switched to an online world in the Covid-19 pandemic lockdowns, said the authority’s director for enforcement and market oversight, Mark Steward.
Given the scale of increase in online scams, the FCA takes the view it cannot take enforcement action against everyone and the time taken to do so would leave consumers unprotected, he added.
Faster warnings limit the number of victims and banks should be checking who is on the list in case they are customers, meaning the financial institutions could be unwittingly aiding fraud by taking payments on behalf of criminals, he said.
“I think the evidence is the banks are doing more. The question is should they be doing more than that? We think there are things they should be doing in addition,” he said.
The FCA is paying Google to publish the regulator’s warnings. “The irony of us having to pay social media to publish warnings about advertising they are receiving money from is not lost on us,” Steward commented.
He said the ball is now in the court of social media firms and they come up with ways to tackle scams.
“If they can’t comply, we’re going to have to do something about it in a more formal way,” he added.
The UK’s draft Online Safety Bill does not require social media companies to check on the validity of firms advertising financial products, something which the FCA is pressing to have made obligatory.
A Google spokesman said: “Protecting consumers and legitimate businesses operating in the financial sector is a priority for us.
“We have been working in consultation with the FCA for over a year to implement new measures and we are developing further restrictions to financial services advertising to tackle the scale of this issue.
“To help protect people from financial fraud in the UK, we have pledged $5m in advertising credits to support public awareness campaigns.”
Though increasing quickly, online financial scams are less widespread than traditional banking fraud which, for example, involves tricking people into giving away passwords or making transfers.
Last year, victims of investment scams who referred to a social media platform lost £63m ($89m, €73m), almost a tenth of the £784m lost to financial fraud, according to the UK’s Action Fraud.
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