The Government is under intense pressure to outlaw fraudulent paid-for adverts in forthcoming legislation after MPs backed the move in a new report.
Industry and consumer groups, politicians and regulators 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.
A powerful joint committee of MPs issued a report today calling for paid-for adverts to be covered in the Online Safety Bill, to force tech firms to stop them appearing on their sites.
Scam adverts: Unsuspecting savers and investors are being lured to hand over cash to fraudsters touting fake or cloned deals and products
As well as their own sites, the tech giants control large parts of the online advertising industry, along with large advertising exchanges, leaving publishers facing a tough task to stop adverts slipping through the net.
Last week, the UK’s technology trade association TechUK announced that Facebook/Meta, Microsoft and Twitter would join Google, TikTok and Amazon in only accepting adverts from firms authorised by the Financial Conduct Authority. Read more from TechUK below.
Mel Stride MP, chair of the Treasury Committee, responded that it was reassuring online giants were ‘finally taking a positive step in the right direction and stopping fraudulent advertisements from appearing on their sites’.
But he said: ‘For too long these companies have turned a blind eye to the criminality at play behind these scams.’
And Stride reiterated that such adverts should be covered in the bill, saying: ‘Legislating against these pernicious scams is the only way to stop ever increasing numbers of people from falling victim to economic crime.’
Meanwhile, Damian Collins MP, chair of the joint committee of MPs tasked with scrutinising the Government’s draft bill, said: ‘We need to call time on the Wild West online. What’s illegal offline should be regulated online. For too long, big tech has gotten away with being the land of the lawless.
‘The era of self-regulation for big tech has come to an end. The companies are clearly responsible for services they have designed and profit from, and need to be held to account for the decisions they make.’
The joint committee’s report says the exclusion of paid-for advertising from the Online Safety Bill would ‘leave service providers with little incentive to remove harmful adverts, and risks encouraging further proliferation of such content’.
Anong the report’s main conclusions was that: ‘Big tech has failed its chance to self-regulate. They must obey this new law and comply with Ofcom as the UK regulator, or face the sanctions.’
The Department for Digital, Culture, Media & Sport, which is responsible for the bill, said it noted the committee’s recommendation on fraudulent advertising and would consider it carefully.
It added that the DCMS is looking into the entire issue of online advertising through the Online Advertising Programme, including whether tougher regulation was needed. Read its full statement below.
Meanwhile, the DCMS said it recognised the huge problem caused by scam ads and online fraud, and the bill would cover user-generated content, for example romance scams or where a person on Facebook puts up a post encouraging people to invest in their Ponzi scheme.
Antony Walker, deputy chief executive of TechUK, said: ‘The joint committee report is well thought through and does a good job of disentangling and restructuring a complex draft bill.
Paid adverts aren’t included, and we know this is how enormous numbers of fraudsters trap their victims
Sarah Coles, Hargreaves Lansdown
‘We welcome the focus on clarity, proportionality and a risk-based approach for the 24,000 companies in scope.
‘There is much in this report that could significantly improve the Government’s draft bill. Importantly it focuses on the need for the bill to be crystal clear about what it is asking businesses to do. Lack of clarity has been one of the sector’s biggest concerns.
‘The ultimate test of this legislation remains whether it enables in-scope companies and the regulator to make swift and effective decisions without unintended consequences for fundamental freedoms online.’
Walker said that overall the MPs’ report takes a nuanced and proportionate risk-based approach, but there were areas of concern, including ‘a risk that the extension of scope to include fraud could over burden the communications regulator’.
‘We believe the issue of financial fraud should remain in the remit of the Financial Conduct Authority,’ he said.
Walker went on: ‘The next phase of this process must include thorough engagement by Government with in-scope services to get into the detail of how the bill will work in practice for different companies.
‘We encourage Government to come forward with a revised and improved bill quickly so that we can get this new regulation into law.’
A coalition of 14 consumer groups, charities and industry bodies which has called on the Government to change the ‘flawed’ bill welcomed the committee’s recommendation that paid-for digital adverts are included.
‘This will be vital in safeguarding the public from the epidemic of scams perpetrated by online criminal gangs,’ said the coalition, which spans 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.
‘Our view remains that the Government’s current proposed approach to tackling online fraud in the draft Bill is flawed.
‘Including measures to combat user-generated fraud, whilst leaving fraud facilitated via paid for digital adverts out of scope will only lead to complex and muddled legislation, creating loopholes for criminals to exploit and a poor outcome for consumers.
‘Fraudsters will be able to continue to exploit people online by posing as legitimate businesses or using fake celebrity endorsements to steal from the public.
‘The coalition is by no means alone in this view. The Financial Conduct Authority, Bank of England, City of London Police, Work and Pensions Committee and Treasury Committee have all called for fraud carried out via paid-for advertising to be brought in scope of the bill.’
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: ‘There are a number of problems with the bill as it stands, not least the fact that paid adverts aren’t included, and we know this is how enormous numbers of fraudsters trap their victims.
‘In addition, it’s not designated as “priority illegal content”, and isn’t specifically mentioned in the way other risks are.
‘It means providers only have a duty to remove fraud when it’s reported by users. And there’s a risk that it’s only likely to be reported by users when they have fallen victim.’
‘The Competition and Markets Authority warned that at the moment legislation means that providers have to take proactive steps to minimise the risk from content designed to damage people’s finances, so the new legislation could actually undermine existing rules, and weaken protections.
‘The committee called for it to be designated as a priority, so providers would have to control the risk of content appearing on the site. They also want fraud to be specifically mentioned alongside other risks, so the bill itself rather than secondary legislation would require platforms to proactively stop fraud from appearing.’
Coles said that evidence heard by the joint committee of MPs included that victims of fraud lost £2.3billion over the past year, and 85 per cent of scams rely on the internet.
MPs were also warned by insurance companies that fraudsters can make copies of providers’ websites and pay for them to appear at the top of search results, added Coles.
