Social media and online giants should pay compensation to those who have been a victim of fraud when using their sites, the Treasury committee has said in its report on economic crime, alongside a swathe of recommendations for the government.
The MPs said this measure would “rapidly transform” the approach of online companies when it comes to managing fraud on their platforms, in their report released today (February 2).
The cross-party committee told the government to “urgently legislate” to ensure mandatory reimbursement for victims of authorised push payment fraud from financial services.
This type of fraud is a scam where the victim is tricked into making large bank transfers to an account posing as a legitimate payee.
This is a repeat of a call made by the previous Treasury committee in 2019.
Mel Stride, chairman of the committee, said fraud had soared during the pandemic and MPs have heard “heart-breaking” stories of victims who have lost large sums of money.
“For too long, pernicious scammers have acted with impunity, ripping off innocent consumers with fraudulent online adverts, impersonation scams and dodgy crypto investments,” he said.
“While the government has made some progress in this area, we’re today calling on them to push harder and act faster on the growing fraud epidemic."
While some of the recommendations can be implemented quickly, Stride said, the report also included a number, such as crypto regulation and Companies House reform, which will require a longer-term approach.
“Taken together, our proposals give the UK a fighting chance to get back on the front foot and stop these scammers in their tracks.”
Other recommendations included:
- Creating a single law enforcement agency with clear responsibilities for fighting economic crime;
- Social media firms being instructed to restrict access to financial promotions services on their platforms to firms that have been authorised by the FCA, acknowledging that some firms already do this;
- The government should ensure financial services advertising regulations apply to online companies and the FCA has the necessary powers to effectively enforce the regulations;
- The Draft Online Safety Bill should be amended to include fraud; and
- The government reform Companies House, for instance charging a £100 fee for company formation, in order to ensure UK companies are not used to launder money and conduct economic crime.
The MPs also highlighted the increasing risks around crypto assets, and said it was “welcome news” that crypto ads will be brought under the scope of financial promotions legislation.
However, they added it was “unacceptable” that not all crypto firms have been registered for anti-money laundering purposes.
MPs have long been calling for legislation to tackle online scams, and this report is the result of an inquiry by the committee into online fraud, which began last January.
At the end of last year, three social media giants agreed to change the way they managed adverts to clamp down on online scams.
Twitter, Meta (previously Facebook), and Microsoft all committed to introducing a revised advertising onboarding process, which requires UK regulated financial services advertisers to be authorised by the Financial Conduct Authority.
In practice, this will mean that any advertiser regulated by the FCA will need to be pre-authorised by the regulator before promoting any financial products targeting UK users.