MPs slam FCA and tech giants for cashing in on pension scams

MPs have called out technology giants in the likes of Google and said they must be held to account for advertising pension scam adverts.

A report from the Work and Pensions Committee (WPC) is calling on the government to “act quickly and decisively” to protect pension savers, more than five years on from the introduction of the pension freedoms, which have put people at risk of scams and fraud.

The report warns that commonly cited figures of the scale of pension scamming are likely to underestimate the problem adding that Google has been accepting payment to advertise scams and payments from regulators to publish warnings, therefore engaging in “immoral” acts.

The situation is likely to be getting worse with the COVID-19 pandemic offering criminals new opportunities for scamming, it said. The Pension Scams Industry Group estimates that £10bn has been lost by 40,000 people to pension scams since 2015, with online fraud costing £190bn a year.

The committee added that regulators have failed to hold search engines and social media to account for hosting scam adverts as they do traditional media.

WPC said that the reputation of Action Fraud, the UK’s national centre for fraud and cybercrime, has been left “in tatters” due to its failure to manage the expectations of victims and a lack of action on cases. The Financial Conduct Authority (FCA) was also criticised for repeated failures in stopping scams, punishing scammers and retrieving scam proceeds.

The committee said the FCA must “raise its game” and publish information about its enforcement action. “It should not require legislative solutions to deter global firms from benefiting from the proceeds of crime, but unfortunately legislation is clearly needed,” the report said.

The committee urged the government to rethink its decision to exclude financial harms from the forthcoming Online Safety Bill and use it to legislate against online investment fraud; in the same way as traditional media, online publishers are required to ensure that financial promotions are authorised.

The existing Project Bloom should be renamed the Pension Scams Centre and given dedicated funding and staffing to manage an intelligence database and law enforcement, it said.

Work and Pensions Committee chair Stephen Timms said, “The pension freedoms brought more choice for savers on how to use their pension pots, but the reforms have also opened up a whole new world of opportunity for scammers and fraudsters.

“At the same time, a woeful lack of online regulation has helped them reach more people than ever before. The result is an online free-for-all, where scammers can advertise with impunity while the tech giants line their pockets from the proceeds of their crimes.

He added that given how global firms such as Google have been increasingly influential as providers of information, consumers look for financial advice on it. However, they were let down “by not being afforded the same level of protection they receive from adverts which appear on television or in a newspaper.”

“The Government and the regulators have been left playing catch-up following the pension freedom reforms and must now act quickly to protect savers and their hard-earned money,” Timms continued.

Reacting to the accusation, Google said it has recently updated policies aimed at stopping fraudulent behaviour, has added more layers to its advertiser verification processes, and has also been working closely with the FCA.

A Google spokeswoman said, “Protecting consumers and credible businesses operating in the financial sector is a priority for us.

“We take dishonest business practices and misleading ads very seriously and consider them to be a violation of our policies.

“Last year, we updated our financial services policies and removed 3.1 billion bad ads from our platforms, of which 123 million were ads related to financial services. When ads do not comply with our policies; we take action to remove them.”

A Government spokesman said, “We recognise the concerns about online scams and fraud, and we continue to work closely with industry, regulators and law enforcement partners to pursue fraudsters, close down the vulnerabilities they exploit and make sure people have the information they need to spot and report scams.

“The minister for pensions has been very clear that some tech companies are failing pension savers, that they must do more to crack down on scam adverts and should use their existing powers to stop online scammers using their site to promote fake adverts.”

Various industry experts welcomed the report and said it was high time the scams were looked into by the government. Trade association for wealth management and financial advice industry PIMFA CEO Liz Field commented, “‘In order to ensure that savers can transact safely and with confidence with their hard-earned pension savings, we are pleased that the Committee has supported our recommendation that the government should include financial harm within the Online Safety Bill.

“Savers cannot continue to be liable to lose their life savings because of what amounts to regulatory shades of grey and the government must act to both empower the Regulator, as well as place a duty of care on tech providers to undertake proper due diligence on adverts and remove harmful ads where appropriate.

“This, in partnership with the government’s forthcoming policy on financial promotions will be a welcome step in enhancing consumer protections, increasing confidence as well as reducing individual claims on the Financial Ombudsman Service and Compensation Scheme.”

Echoing a similar sentiment, director of policy and advocacy at Which? Rocio Concha said: “This report is a damning indictment of the approach of tech giants like Google to tackling scams. These companies have some of the most sophisticated technology in the world, yet they are failing to utilise it to prevent scammers from abusing the platforms by using fake and fraudulent content on an industrial scale to target victims and devastate lives.

“The case for including scams in the Online Safety Bill is overwhelming. Online platforms must be given a legal responsibility to identify, prevent and remove fake and fraudulent content from appearing on their sites and give their users the protection they deserve. The government must not miss the opportunity to act now.”

Additionally, director of savings and protection at the Association of British Insurers Yvonne Braun believes that pension scams have caused untold misery for tens of thousands of people.

Braun added, “Efforts to combat and deter fraudsters must be stepped up urgently by the authorities to change fraudsters’ risk/reward trade-off. Fraudsters are also increasingly using online channels and social media, and we strongly support including financial scams in the Online Safety Bill. Until legislation is in place, we also agree that social media platforms should immediately remove content at a regulator’s request to protect consumers from financial scams.”

Furthermore, association of member nominated trustees co-chair David Weeks said the report was much needed for offering “clear analysis and clear action calls”.

He said: “The MPs have turned the spotlight on a dark corner that has brought misery to many.

“There are two takeaways from me: First, we should ensure that pension scheme boards have good member nominated members. They are close to the individual members and can have good general commercial savvy compared with many so-called specialist ‘professional’ trustees.

“Second, turn the spotlight on the independent adviser industry. Some of these seem reluctant to stick to a simple brief to vet an individual investment. They want instead to wander off on general lifestyle financial planning exercises to justify extra fees.”

Weeks added: “There is evidence that the problem of scams is much greater than we supposed: In scale, £10bn has been syphoned from 40,000 victims since 2015. In nature, the scope is wider: fine wines and spurious claims about investing to save the environment, to name but two.

“There is a need for action all the way up and down the chain of responses. First comes identifying scammers and curtailing their activities. Then comes flagging up suspected fraudsters. Giving guidance and advice to potential victims follows. Then, importantly, comes ensuring that HMRC is seen to be on the side of the victims, not the tax collectors. There should be no hounding victims for tax claims on sums that they have already lost.”

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