FCA should be able to direct Ofcom on scam ads, says Pimfa

FCA should be able to direct Ofcom on scam ads, says Pimfa

Pimfa has called for the Financial Conduct Authority to be given the power to direct Ofcom to act over potentially fraudulent online adverts.

In an evidence session to MPs around the online safety bill last week (May 26), Pimfa director of government relations and policy Tim Fassam said the FCA should have the authority to act over fraudulent user generated content that appears on search engines and social media platforms. 

The bill, which is effectively a framework aiming to protect internet users from scams and hold tech giants to account, came one step closer to becoming law after being introduced to parliament in March, nearly a year after the first draft was published.

However, Fassam called for an amendment to the bill that would see partner regulators such as the FCA provide strategic support to Ofcom to prevent harm being introduced to financial services consumers.

While the online safety bill deals specifically with fraud and breaches of the financial services and markets act, Fassam said it was unclear how Ofcom will ensure it has “the expertise needed to identify breaches”.

Referencing London Capital & Finance, Fassam said in this case, the regulated firm was able to introduce harm into the market through the sale of unregulated, speculative mini bonds aided specifically by advertising, offering significant returns in a low interest rate economy. 

He argued that if the FCA were able to swiftly prevent adverts of this nature through Ofcom it could significantly reduce the risk of potential harm to consumers.

“Scams and fraud are the most prevalent form of crime in the UK, and it is important UK laws are focused on where and how that crime is perpetuated,” he said.

“The pandemic led to UK society becoming increasingly isolated and naturally taking solace online. Since then we have seen a worrying rise in incidents of fraud, up 41 per cent compared with pre-pandemic and 9 per cent of all UK adults reporting being a victim of fraud.

“This represents a real financial loss of £2.6bn for the UK, while the emotional and physical toll it takes is estimated to be the equivalent of £9.3bn per year.”

A DCMS spokesperson told FTAdviser: “The scope of the online safety bill requires Ofcom to rely on their strong relationships with other regulators, including the expertise of the Financial Conduct Authority.

“The bill ensures large tech companies take robust action to tackle fraud, including fraudulent and misleading online adverts, protecting their users from harmful scams.”

Pimfa was also supporting a Which amendment to the bill to ensure that search engines had the same duty of care as social media websites to eliminate fraudulent adverts on their platforms.

Fassam added: “It is vital that UK laws are constructed to ensure that UK consumers are adequately protected online. In our view, this bill represents significant progress in ensuring that this is the case.