The Financial Conduct Authority has said social media firms should be forced to stop financial adverts by implementing “systems and controls”.
At the joint committee hearing on the draft Online Safety Bill yesterday (October 18), the FCA, alongside other regulators, was quizzed on its views about the government refusing to include paid for adverts in the online safety bill.
The government’s proposed legislation about online harms covers some financial harms but paid-for advertising, one of the main sources of online investment scams, is still not covered.
Mark Steward, FCA executive director of enforcement and market oversight, said under the Financial Services and Markets Act, unless an individual is FCA registered, it cannot run ads in the UK targeting UK citizens with financial products.
However, he explained that despite this, it does not stop advertisers doing it, nor does it stop social media firms from permitting that to happen.
“We are very strong supporters of an approach that would obligate social media firms to create systems and controls, because we know from our financial services experience how valuable regulated systems and controls can be in preventing harm.
“We think this is an area where prevention is much more preferable than cure, because the cure unfortunately is very difficult, expensive and frustrating because it leads to perpetrators who are out of their reach overseas.”
Steward said the FCA still wants a crackdown on paid for advertisements included in the bill, despite the government's insistence there would be a consultation on online advertising regulation later in the year.
He said: “The way in which the bill talks about the development of codes appears to be a way in which the regulators could identify areas where social media firms and platforms need to design their own systems and controls to avoid harm from occurring.
“Those systems and controls might include an obligation to ensure that anyone that is advertising a financial promotion is authorised by the FCA or it might involve having an obligation to do some checks at the gateway where you have information that might be inconsistent or contradictory.
"[The] obligation has to sit somewhere in the system because at the moment it's unfiltered, at the moment the only filter for the industrialised production line for these ads is whether they are paying the fee to the social media company and that doesn’t appear t be the right filter given the amount of harm this is causing.”
In June, Google made a move to clamp down on financial fraud appearing on its platforms by forcing all financial services advertisers to demonstrate they are authorised by the FCA.
But last month, the search engine hit out at suggestions fraud committed through paid-for advertisements should be included in the much-debated online safety bill, saying the bill was not “targeted” enough to “efficiently tackle” these types of online scams if they were included.