• Tue. Jun 14th, 2022

Self-policing online ads simply won’t be enough

ByVirginia D. Bannon

Jan 11, 2022

The problem of fraudulent online advertising has been raging for years now, but it’s really been two years since we’ve seen a dramatic upturn in business, especially with adverts posing as a service business financial.

As early as March 2020, then-FCA Chief Executive Andrew Bailey described the challenge of tackling fraudulent online advertisements as a “whack-a-mole” game. Hampered by the perimeter and lack of legal powers, the only weapon in the FCA’s arsenal is a warning on the website and the hope that their own ads warning people of the dangers of online ads “too good to be true” are seen by people before they are. too late.

Over the past five years, FCA impersonation scam warnings have increased dramatically, with an explosion in the past two years.

Source: Quilter’s analysis of the FCA warning list

Of course, not all of these impersonation attempts will feature online advertising to lure people in, but many will. It is the weapon of choice to ensure maximum visibility in the event of a scam attempt.

In short, this is not a new problem. Tech companies have known for years that there is a problem with fraudulent ads appearing on their sites and people losing money as a result. Google, to its credit, took action in September this year by introducing a new requirement that all financial services advertisements must come from FCA-licensed firms or an approved third party of an FCA-licensed firm. FCA.

However, other tech companies waited until the very last minute. This was only after the committee of the Online Safety Bill declared in December that the online world should no longer be the land of anarchists and recommended that advertisements be included in the scope. of the bill, that they have decided to embark on self-regulation.

Facebook, Microsoft and Twitter have all announced that they will adopt the same policy as Google to provide some degree of verification before ads appear on their sites.

While this is laudable, this should not be used as an excuse for the government not to act on the Committee’s recommendation. Self-regulation cannot go any further.

For starters, self-regulation only covers companies that have decided to adopt the new policy. Instead, the legislation will cover all companies offering online advertisements and thus protect everyone when they go online.

Likewise, we need a system controlled by an independent regulator and with penalties for companies that make mistakes. This cannot be achieved through self-regulation, but this is exactly what the upcoming online safety bill can provide.

The bill will shift the burden of responsibility from consumers protecting themselves against scams to tech companies and social media platforms, which will have legal responsibility to tackle harmful content online.

While the bill currently includes scams that appear via “user-generated content”, i.e. an individual post about a dodgy investment plan or a blatant scam, it will not cover scams that appear in advertisements or cloned websites. This anomaly must now be corrected by the government.

It is through this incentive structure that we will create an online environment where people can trust what they consider to be genuine and can be confident that if they find an investment online, at least the provider will authorized by the FCA. Otherwise, we risk the “mole hit” problem causing havoc for years to come.

Matt Burton is Chief Risk Officer at Quilter