The Financial Conduct Authority has warned social media firms and search engine providers that it will take action against those that host scam adverts.
At the Treasury Committee evidence session on economic crime held yesterday (June 14), the FCA was quizzed on how it would handle media companies that host online scams.
FCA head of enforcement Mark Steward told the committee the regulator has had “good engagement” with all the social media companies and has made it very clear that it expects them to be taking action to reduce the number of scams that are found on their sites.
Steward said: “In many respects, the problem that we've described is one that is shocking for them as well and the challenge is whether they are really able to come up with a way of tackling this problem that is also consistent with their with their current business models.
“In many ways, consumers and advertisers having ready access to what is on the internet, being able to find ads that are tailored to their needs, being able to see YouTube programmes, being able to see Twitter feeds, whatever it might be, that is answering the desire or the demand that you want, is something that means that the gateways are naturally very low and they function best when those gateways are open and they can allow volume through them.”
He added: "What we're requiring them to think about is how that can be interrupted by some kind of programme that identifies the very things that are going to cause damage to consumers.”
Speaking to the MPs, Steward said the regulator understands there are logistical challenges but claimed that it was fundamentally important things changed in this space. It was therefore in discussions with each of the firms.
“We shall see how successful they really are because the proof will be in the pudding. If the proof is not in the pudding, then we're going to have to take action of a different kind.”
Steward explained that until December 31, 2020, the UK had been blocked from taking action against online platforms due to EU rules on financial adverts.
But he said there was a provision in the Financial Services and Markets Act that particular financial promotions could only be communicated by a person who was an FCA authorised firm or individual.
“So clearly the 1200 warnings that we issued last year which we saw on Google searches were not advertisements that were issued by FCA authorised firms, nor were they approved by any FCA authorised firm.
“Now this is something that Google could have recognised at the gateway before allowing that ad to appear on its searches, but it didn't have any mechanism for identifying what is a financial promotion that requires this and what is not a financial promotion that requires this.”
He added: “Further, there was an exception to the rule in the UK, that disapplied this obligation for advertising that was sourced from an EEA state and this exception applied right until the 31st December 2020.