MPs have called on the government to take a tougher stance on big technology companies hosting pension scam adverts.
A 70-page report from the Work and Pensions committee, published this weekend (March 28), said regulators “appear powerless” to hold online companies to account for hosting scam advertisements in the same way they would traditional media.
In the report, which forms part of an ongoing inquiry into the impact of pension freedoms, the committee said it was “immoral” that these global tech firms were accepting payment to advertise scams and then further payment from regulators to warn about the scam.
While MPs said it “should not require legislative solutions” to deter global firms from benefiting from the proceeds of crime, this was clearly needed.
The committee stated: “We recommend that, in order to create parity between traditional media, such as TV and newspapers, and new media, including search engines and social networks, paid-for advertising on online platforms should be covered by the regulatory framework for financial promotions.”
This would require online publishers to ensure that any financial promotion they communicate has been approved by an authorised person unless it is exempt from the financial promotions regime.
MPs have also called on the government to rethink its decision to exclude financial harms from the Online Safety Bill and to use it to legislate against online investment fraud.
Meanwhile, in the period between now and any legislation coming into force, it recommended that voluntary codes of conduct should be used by search engines and social networks which make it clear that “a request from a UK-based regulator is sufficient to remove a scam advertisement”.
Over £30m lost to pension scammers was reported to Action Fraud between 2017 and August 2020, but the industry says this is likely a substantial underestimate.
The Pension Scams Industry Group estimates that £10bn has been lost by 40,000 people to pension scams since 2015.
Trade association Pimfa welcomed the measures for greater consumer protection laid out in the report.
Liz Field, Pimfa's CEO, said: “Savers cannot continue to be liable to lose their life savings because of what amounts to regulatory shades of grey and the government must act to both empower the regulator, as well as place a duty of care on tech providers to undertake proper due diligence on adverts and remove harmful ads where appropriate.
"This, in partnership with the government’s forthcoming policy on financial promotions will be a welcome step in enhancing consumer protections, increasing confidence as well as reducing individual claims on the Financial Ombudsman Service and compensation scheme.”
FTAdviser reported earlier this month (March 18) that Google has started to roll out a verification process for advertisers in a move that will crack down on rogue lead generators.
This means consumers can review the company behind the advert, and find out about the advertiser, before they click. They have already been able to report adverts for a while.
Prevention
The Pension Schemes Act 2021 will allow people’s statutory right to transfer from their pension scheme to be restricted where there are signs of a pension scam.
Regulations will be developed by DWP and are expected to be in place later this year, according to the committee.
Under these plans, pension scheme trustees will be required to check if a transfer showed signs of a pension scam before allowing it to take place.
The committee has now recommended that a review should be published within 18 months of the regulations being operational, and if there are any concerns about the operation of the policy this will allow legislative changes to be made during this parliament.
The new regulations will identify potential indicators of a pension scam which would raise either red or amber flags.
A red flag would allow a transfer to be blocked and an amber flag would allow a transfer to be paused until a person has received appropriate guidance.
The committee said any firm appearing on the Financial Conduct Authority's warning list should constitute a red flag.
The FCA hosts a warning list which publishes details of unregulated firms which appear to be carrying out an FCA regulated activity without authorisation or permissions.
It said: “If this is not possible, then the red flags developed by DWP should be defined in such a way that any firm or individual appearing on the FCA warning list would trigger a red flag.”
amy.austin@ft.com
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