MPs blast scam money ads being left out of Online Safety Bill

MPs have slammed the Government for defying widespread calls to crack down on scam financial ads in its forthcoming Online Safety Bill.

They said the present law was ‘toothless’, and allowed ‘scammers to advertise with impunity while tech giants line their pockets from the proceeds of crime’.

The Government has rejected demands from influential backbench MPs to cover paid-for ads, such as those on search engines like Google, in its new legislation – despite backing for this also coming from regulators, top financial firms and consumer group Which?.

User-generated internet content will be included in the bill, however. 

Meanwhile the Government told MPs it is looking into how advertising can enable online fraud and will hold a consultation later this year.

The Financial Conduct Authority, which recently threatened to take legal action against Google if it doesn’t do more to tackle online fraud, has repeated its view that paid-for advertising should be covered in the new law. 

The finance industry and crime experts have raised the alarm over the past year about soaring cases of sophisticated fraudsters ‘cloning’ their legitimate operations and products to steal people’s cash. 

Fraudsters are using bogus websites, forged documents, fake adverts on social media and search engines, and the names and near-identical email addresses of people working in the finance industry to impersonate real companies.

Even reputable websites can be targeted through third party advertising exchanges by fraudsters constantly changing adverts to get through blocks.

The Work and Pensions Committee of MPs urged the Government to listen to its own financial regulator and legislate to ensure global tech firms are ‘held properly responsible for hosting pension scam adverts online’.

Chairman Stephen Timms said: ‘Ministers claim to understand the devastating impact of illegal activity online, but by constantly failing to act against paid for adverts online they remain at odds with their own enforcement agency and totally ambivalent to what the FCA warns is a major source of harm.

‘The FCA sees the damage being done to consumers by online scams day in day out. It doesn’t think it has enough powers to protect people, yet still the Government cannot be cajoled into action.

‘A vague promise to consult later this year is too little too late. Without backing words with action, the law will remain toothless.’

In its response to the committee’s report on pension scams, the FCA said: ‘It is online advertising that is the major source of the problems leading to very significant consumer harms.

‘The outcome we want to see is that platforms have an obligation to identify and remove fraudulent content – regardless of its format.

‘We do not agree with the arguments made by some platforms that such a measure would undermine competitiveness of the UK technology sector as we do not consider a business model which acts as a gateway to large scale fraud against consumers constitutes a sustainable business model.’

The FCA revealed this week that £2.24million has been lost to pension scams so far this year, and has just launched a new advertising campaign to raise public awareness – find out more about its new psychological approach to putting people on their guard below.

The Government’s response to the committee outlined its efforts to combat online financial scams, including a ministerial roundtable with the tech and banking sectors, police and regulators last April, where it was agreed to work on a tech sector charter to tackle fraud.

Meanwhile, an economic crime board co-chaired by the Chancellor and the Home Secretary has agreed the framework of a fraud action plan for 2022-25, which will include the Government working with industry to remove vulnerabilities that fraudsters exploit.

But the Government added regarding its online safety legislation: ‘The Bill will not tackle fraud facilitated through paid-for advertising, such as adverts on search engines.

Criminal gangs are using legit-looking clone sites to steal ‘big money’ 

Phil Rolfe, a financial crime expert, calls for urgent action to fight the fraud menace and explains how to protect yourself here.

Clone fraud: Criminals are luring investors to fake comparison sites touting bogus products in order to steal their cash

‘The Department for Culture, Media and Sport is considering how online advertising is regulated through its online advertising programme. 

‘This work will look at ensuring that standards about the placement and content of advertising are effectively applied and enforced online to reduce consumers’ exposure to harmful or misleading advertising.

‘This work will look at the role advertising can play in enabling online fraud and help inform our future efforts to tackle it. DCMS will be consulting on this issue later this year.’ 

Gareth Shaw, Which? head of money, says: ‘Fraudsters are using increasingly sophisticated techniques to trick consumers into handing over the pension savings they have built up over decades.

‘Search engines like Google are awash with adverts for investment schemes promising returns far greater than the paltry rates on offer from most savings accounts – and they are often designed to look just like the websites of well-known financial firms.

‘Because pension scams often start on the internet, online platforms must be given legal responsibility, through the Online Safety Bill, to identify, remove and prevent fake and fraudulent content, including adverts, from appearing on their sites in the first place.’

Kate Smith, head of pensions at Aegon, says: ‘It’s really important that we keep pension scam awareness at the front of people’s minds. We therefore welcome the FCA’s latest ScamSmart campaign.

‘Unfortunately, this comes a day after the Government rejected MP’s calls for including measures to tackle fraud facilitated by online advertising in the Online Safety Bill.

‘Although disappointing, this hasn’t been entirely kicked into the long grass, as the Government has committed to consult on this later this year looking at how online advertising is regulated.

‘The Government needs to move quickly on this, as clamping down on the rogue online advertisers trying to separate people from their money will be part of the toolbox to protect people’s pension savings from scams.’

Jon Greer, head of retirement policy at Quilter, says: “The FCA’s research suggests that all too often, people incorrectly assume they can trust what they see online to be genuine.

‘They trust that because a pension “opportunity” appears on a website or a search engine that it must be the real deal. Often, however, it is a scam.

Online financial fraud: Cases are soaring, according to top financial firms 

‘Awareness is one of the most powerful weapons against scammers. Spotting a pension scam can be tricky and it is absolutely critical for savers to have their guard up when approached with an offer to transfer into unusual assets promising outlandish returns, or take advantage of a scheme offering early access.’

He adds: ‘It’s not just fraudulent pension transfers that people need to be aware of. Millions have embraced pension freedoms with open arms, but when people take their tax free cash it is often a pot of money bigger than they have received before, and often people will search online for what to do with it.

‘This is partly what’s fuelling the rise in investment scams. In the year to May 2021, Action Fraud received 506 reports of pension fraud, with the reported loss estimated to be £8.1m. Over the same period, reports of investment fraud reached over 24,000 with over £630 million lost.

‘And awareness alone is not the answer. Consumers need more protections from pension and investment scams when they go online. The way we regulate adverts in newspapers and adverts online are worlds apart.

‘It’s time the government added fraudulent online advertising to the Online Safety Bill so that technology companies face legal requirements to tackle the scams that appear on their sites.’

What is the FCA doing to combat pension scams?

The FCA has launched a new awareness-raising ad campaign on TV, radio, online and via paid search.

The watchdog is trying to change the mindset of people when they encounter scams, after research showed people are five times more likely to take up a ‘free pension review’ from a stranger online than someone in their local pub.

It has signed up psychologist Dr Linda Papadopoulos to help people ‘flip the context’ of receiving a pension offer to another setting like a pub or shop and be more suspicious when assessing them.

She says: ‘Scammers will use behavioural tactics to trick you into a false sense of security.

‘It is important when approached with a financial offer on your pension, to take yourself out of the context or pressure of that moment. 

‘We know that people wouldn’t accept a free financial product in a pub or would be unlikely to make a purchase in a random flash sale – so why risk it with your pension?’

Mark Steward, executive director of enforcement at the FCA, says: ‘Imagine a stranger in a pub offering free pension advice and then telling you to put those savings into something they were selling. It is difficult imagining anyone saying yes to that.

‘It’s no different online. Whether you’re on social media or checking your emails, if someone offers you free pension advice, “flip the context” and imagine them doing the same thing in real life. Stop and think how you would react.

‘Check the status of a firm before making a financial decision about your pension by visiting the FCA register. Make sure you only get advice from a firm authorised by the FCA to provide advice, before making any changes to your pension arrangements.’