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FCA boss Nikhil Rathi demands crackdown on scams

FCA boss demands crackdown on internet scams as ministers face growing backlash over new online safety laws

The City watchdog has called for an urgent crackdown on rampant internet scams that are swindling savers and pensioners.

Nikhil Rathi, chief executive of the Financial Conduct Authority, warned that fraudsters are luring victims by advertising sham investment schemes online with impunity.

But he said laws proposed by ministers fail to address the problem and urged them to go further.

Crackdown: Nikhil Rathi, chief executive of the Financial Conduct Authority, said fraudsters are luring victims by advertising sham investment schemes with impunity online

The draft Online Safety Bill was unveiled this week but will only tackle fraudulent investment schemes posted by users on social media – leaving out the avalanche of scams being spread through digital ads and websites.

Rathi’s comments echo calls by the Mail and industry groups for online financial scams to be tackled properly by the legislation, by making web giants legally responsible for blocking and removing them.

And it comes as new figures reveal that 96 per cent of investment scams now originate online.

Rathi (pictured) stressed that dealing with scams posted by social media users ‘only captures part of the issue’ and that the Government needs to address digital ads as well.

He told MPs on the Treasury Committee: ‘Online advertising, which is where the fees are generated by the platforms, needs to be looked at very closely as well.

‘It is the adverts that are persuading some of these vulnerable customers to go after high-risk investments and, indeed, scams.

‘People are looking for returns on their money and are tempted by all kinds of opportunities that are presented to them. We would like the Online Safety Bill extended to online advertising.’

The warning is the strongest intervention yet from the City watchdog over the issue.

Rathi warns over working from home speculative trading boom 

Youngsters stuck at home during the pandemic are piling money into dicey assets for ‘entertainment as much as investment’, the City watchdog boss has warned.

Nikhil Rathi, chief executive of the Financial Conduct Authority, said people working from home or on furlough were driving a rise in ‘speculative trading’.

Many did not understand that by buying cryptocurrencies such as bitcoin or social media-hyped stocks such as Game Stop they were ‘putting very significant amounts of their money at risk’.

Rathi told MPs on the Treasury Committee that more must be done to educate consumers about risks and protect them from harm. 

He said: ‘We are seeing – and we’ve put warnings out around this – a very sharp increase, maybe as a result of people being at home during the pandemic, in highly speculative trading activity, including young people speculating on cryptocurrencies or on US stocks like Game Stop.

‘And [they are] not really understanding that in doing that they are putting very significant amounts at risk and to some extent perceiving that it is entertainment as much as investment.’

Rathi said the FCA was trying to boost awareness through warnings and advice, and urged the Government to legislate to make web giants more responsible for adverts, and force investment firms to run improved checks on how knowledgeable clients are. 

As previously revealed by the Mail, the FCA is spending nearly £600,000 per year on Google adverts to warn consumers about investment scams.

But it is locked in a battle with fraudsters who are also spending millions on adverts, while Google makes money from both sides.

Google insists it is taking measures to ‘tackle the scale of this increasing issue’, including joining a task force set up by banks to exchange information quickly. 

But critics say that these voluntary efforts do not go far enough and are calling for the firm and Facebook, the other major digital advertising provider, to be given a legal responsibility for rooting out investment scams from their platforms.

Our Stamp Out Investment Fraud campaign demands that ministers make this part of the Online Safety Bill and is backed by Britain’s biggest banks, insurers and wealth managers.

UK Finance, which represents banks and is supporting the campaign, warned that the vast majority of financial scams now originated online.

This includes a shocking 96 per cent of investment fraud. And UK Finance boss David Postings warned that the proceeds of the ‘devastating’ scams were being used to fund organised crimes like terrorism, drug trafficking and child sexual exploitation.

He added: ‘The banking and finance industry is continuing to tackle fraud on all fronts, but there is a limit to what we can do alone.

‘We’re pleased that the upcoming Online Safety Bill will tackle some aspects of fraud but it won’t protect people from all fraud that takes place online.

‘This leaves a large proportion of the public at high risk of being scammed online, because criminals are experts in adapting their tactics to exploit any loopholes.’

Read more at DailyMail.co.uk