The city regulator has warned it will take legal action against Google and social media companies if they continue to accept ads for online financial scams that flourished during the pandemic.
Financial Conduct Authority chief enforcement officer Mark Steward told the Treasury Select Committee on Monday that the UK had until recently been barred from taking action against online platforms that failed to screen financial advertisements to ensure they were approved by a company authorized by the FCA. or individual.
This was due to the fact that EU financial advertising rules did not extend to online platforms such as Google. This “exception” effectively allowed crooks to post fraudulent advertisements online since they did not need to go through additional checks. But the FCA is now free to crack down on violators, Steward said.
“It’s not immediately obvious that social media was really aware of what this change really meant. We made them aware, ”Steward said. “We now have a lot of traction with the social media industry to force change,” he added. If companies don’t comply, “we’ll take action.”
The warning came a month after City of London Police and consumer organization Which? joined forces to urge the government to make changes to its online security bill that would ensure tech giants like Google and Facebook are held legally responsible for bogus and fraudulent ads.
But the newly regained powers of the FCA could be another way for online platforms to account for the proliferation of online scams.
Scams and frauds have escalated over the past year, with stranded consumers spending more time online. Some people end up losing money after using search engines to research investments in an era of record high interest rates, while others have been deceived by ads on social media sites. Many scams have involved cryptocurrencies such as bitcoin or programs that claim to offer early access to pension funds.
FCA said it was forced to issue 1,200 online warnings last year for fraudulent ads on Google and social media platforms that were not issued or endorsed by FCA-licensed companies . This is double the number issued in 2019.
“This is something that Google could have recognized at the gateway, before authorizing [those adverts] to appear on his research, ”Steward said.
MPs said companies like Google benefit from online scammers, who pay for ads on their platforms. Meanwhile, Google has also made money from regulators such as the FCA, which spent around £ 600,000 in 2020 to run its own anti-scam ads in response.
Conservative MP and Treasury Committee member Anthony Browne said most people were “absolutely shocked” that social media companies, especially Google, “are profiting from the promotion of fraud.”
“The legal definition of fraud gains financial advantage through deception. And Google is gaining a financial advantage here, and it cheats its customers who use Google, ”said Browne, former chief executive of the British Bankers’ Association.
“He is not the one who generates the content, but he is the one who disseminates the fraudulent content and stages the deception. It seems to me that there is actually a legal case to be done here, ”added Browne.
Browne asked how far the FCA is willing to go to punish companies that break the rules. “You imply that [you] will take legal action against social media companies like Google if they don’t comply with the financial services market? “
“Yes,” Steward replied.
A Google spokesperson said protecting consumers and legitimate financial services companies is a priority for the company, which has set aside $ 5m (£ 3.5m) in Google ad credits to support public scam awareness campaigns to protect people against fraud in the UK. .
“We have been working in consultation with the FCA for over a year to implement new measures and are developing new restrictions on financial services advertising to address the scale of this problem,” they said. .