The Financial Conduct Authority has been working with celebrity influencers to clamp down on promotions of illegal or risky financial products.
In a speech yesterday (May 16), Sarah Pritchard, executive director of markets, and executive director of international at the FCA, said the regulator understands that many consumers look to social media for advice on financial services so that is where it needs to focus.
Speaking at an event at XLOD Global New York, Pritchard said: “[This] is why we now have a presence on TikTok, Facebook and Instagram as well as on more traditional channels.
“In many ways, finfluencers and the business front line have a lot in common.
“They are – unwittingly in the case of the former – the first line of defence and gatekeepers between consumers and potential criminals.”
Pritchard said as threats within financial services change, the regulator and industry needs to adapt too.
She said firms also need to change the way they respond to them.
“In our hyper-connected world, there is unprecedented speed of change thanks to technology which brings both opportunities and risk,” she said.
“That is why regulators need to get involved – and fast – when we are alerted to a potential threat on the horizon.”
“While technology can present threats, and increase the speed of transmission, it can also offer solutions and more effective defences.”
She explained technology can provide quicker and more innovative ways to solve difficult problems including those which previously could take thousands of human-powered hours to unpick.
“We at the FCA strive to take a dynamic and creative approach to the changing threats, tackling harm at the source,” she said.
“We did this just a few days ago, for example, by bringing in talent agents and teaming up with influencers over the real risks involved in promoting financial products."
Using machine learning, the FCA scrapes more than 100,000 websites every day, she explained.
“Taking down hundreds of those that looked like scams and in 2022, issuing 1,800 warnings about potential scam firms – 400 more than the previous year,” she said.
“We’ve also been working with big tech platforms and social media to tackle illegal financial promotions.
“We have persuaded platforms such as Google, Bing and Meta to introduce revised advertising onboarding processes. They now ban paid for adverts for UK financial services that are not approved by an FCA authorised firm.”
Pritchard said the City watchdog expects more to be done, particularly thanks to the provisions in the upcoming online safety bill.
The financial promotions work looks set to be extended to any firm or influencer anywhere in the world if they are targeting UK consumers, once legislation comes forward, she explained.
“These measures have already protected and will further protect the UK public by reducing the opportunity for fraudsters to advertise their scams as legitimate business.
“For example, since Google introduced its policy, we have seen close to a 100 per cent reduction in paid for scam ads.”
The fight against financial crime
Pritchard said the regulator has “super-charged” its priority to prevent and reduce financial crime as part of its business plan.
She said financial crime controls are most effective if they are calibrated to the current threats and risk.
“If you work on the first line of defence, how often do you review the threats and risks to your customers and the controls you have in place to mitigate against them?,” she asked.
“Do you ask yourself how your company identifies potential threats to your customers? Is there feedback between your customer call centres where they may be reporting potential scams or fraud?”
These are important questions to ask – because in doing so, firms can ensure they are effective at adapting to changing threats of financial crime.
“And this is important, because at the heart of this is ‘confidence’,” Pritchard said.
“All of us want to be able to do business with financial services in confidence, and to trust that effective systems exist to protect from risks of scams and fraud."
Plug and play does not work
Pritchard explained that new firms, or those using new technology, have the best opportunity to calibrate it and make it as effective as it can be rather than those who have to retrofit their systems.
“But it does not mean calibrate and then plug and play forever more,” she said. “You have to keep fine tuning.
“So, I would ask again – as the first line, how often do you review and calibrate the way you are working as threats change?”
The City watchdog has been working with UK and global partners to drive a whole system response to financial crime and intelligence sharing.
Pritchard said: “We can never leave crime spotting to just one team, one organisation or one department, whether that be legal, compliance or other experts.
“It takes all of us working together, coalescing towards a common goal - to protect our markets, our economies, and our people from harm - to retain confidence.”
sonia.rach@ft.com
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