A total £753.9M was stolen online in the UK over the first six months of this year compared with 2020. What protection should the UK’s population expect and who should be responsible for its implementation?
The constraints Covid imposed on us all has resulted in more and more of our time being spent working, learning, shopping, socialising, even exercising online. Of necessity, most aspects of our lives have shifted into the digital space and we’ve been grateful for the freedoms technology’s afforded as the world around us shut down. These very circumstances create chances for exploitation; the internet has become an even more powerful and fertile arena for criminals.
The price some fraud victims pay is catastrophic. Action Fraud figures for the year to April 2021 reveal 413,555 scamming incidences were reported, up 33%, in which victims lost a staggering £2.3bn and suffered huge mental as well as financial harm. For the first time, from January to June this year deception involving targets who were themselves duped into passing over money or sensitive information to thieves (authorised fraud) exceeded the more usual unauthorised fraud whereby stolen cards are used to take money. Losses reached £355.5m from 106,000 instances and the increase reflects a shift away from the traditional banking system by both customers and the criminals who prey on them.
Katy Worobec, managing director of economic crime at UK Finance has expressed concern that though the banking and finance industry invests billions in ant-fraud measures, “criminals are exploiting weaknesses outside banks’ control to trick customers into making payments directly to them.”
In a similar vein, FCA chairman Charles Randell has called for online companies’ immense power to be equally balanced by responsibility. Speaking on September 6th at the Cambridge International Symposium on Economic Crime, he addressed the need for a comprehensive, international response to the problem of online fraud through paid-for advertising. He said, “The tide of regulation is turning all over the world, and online platforms should expect a future where regulation addresses the significant risks they pose in the same way as other businesses… That includes rules which protect people from investment fraud.”
Criticism has been particularly fierce against high profile influencer and celebrity promotion of investment products and cryptocurrencies. Kim Kardashian’s Instagram post advertising Ethereum Max, “a speculative digital token created a month before by unknown developers” to her 250M followers is likely to have reached the biggest audience ever for a financial promotion. The use of TikTok influencers by crypto companies is so widespread they’re known as FinTok advisors and, with younger investors frequently driven primarily by FOMO, a fear of missing out, many fail to appreciate the risks involved.
In a survey of UK consumers by behavioural finance experts Oxford Risk, 36% admitted their understanding of the sector is poor or even non-existent. Many wrongly believed their activities would be protected by the FCA or Financial Compensation Scheme. In fact, since most crypto adverts fall outside the FCA’s regulatory control, the Advertising Standards Authority (ASA) has been forced to step up. Miles Lockwood, director of complaints at the ASA, identifies crypto as “a red alert” priority in financial advertising. Having previously relied on complaints, the body is now proactively searching for problem ads using web scraping and AI technology. It needs to; UK investment scams have nearly doubled to £107.7m this year.
The FCA believes a two-pronged approach is needed to combat online financial scams:
- Appropriate legislation, including self-regulation by online platforms and vigorous enforcement by the authorities
- Improved customer awareness
In a positive move, since 6th September Google has allowed adverts for financial products on its platform only if an FCA-authorised firm has first cleared them. That just leaves Facebook, Twitter, Microsoft, TikTok…
The government is taking some steps towards legislation; in May’s Queen’s Speech it announced the introduction of a new version of the Online Safety Bill which includes financial fraud and user-generated online scams. Unfortunately, however, there are significant, glaring omissions: fraud via advertising, emails and cloned websites. Critics have demanded amendments and, at the end of July, a coalition of consumer groups, charities and industry bodies including Which? and UK Finance united to exert pressure to effect the change. The sums involved are vast. Considering most money lost through bank transfer scams is not reimbursed despite 2018’s voluntary banking code, the changes are desperately needed.