FCA boss Nikhil Rathi demands crackdown on scams

The City watchdog has called for an urgent crackdown on rampant internet scams that are swindling savers and pensioners.

Nikhil Rathi, chief executive of the Financial Conduct Authority, warned that fraudsters are luring victims by advertising sham investment schemes online with impunity.

But he said laws proposed by ministers fail to address the problem and urged them to go further.

Crackdown: Nikhil Rathi, chief executive of the Financial Conduct Authority, said fraudsters are luring victims by advertising sham investment schemes with impunity online

The draft Online Safety Bill was unveiled this week but will only tackle fraudulent investment schemes posted by users on social media – leaving out the avalanche of scams being spread through digital ads and websites.

Rathi’s comments echo calls by the Mail and industry groups for online financial scams to be tackled properly by the legislation, by making web giants legally responsible for blocking and removing them.

And it comes as new figures reveal that 96 per cent of investment scams now originate online.

Rathi (pictured) stressed that dealing with scams posted by social media users ‘only captures part of the issue’ and that the Government needs to address digital ads as well.

He told MPs on the Treasury Committee: ‘Online advertising, which is where the fees are generated by the platforms, needs to be looked at very closely as well.

‘It is the adverts that are persuading some of these vulnerable customers to go after high-risk investments and, indeed, scams.

‘People are looking for returns on their money and are tempted by all kinds of opportunities that are presented to them. We would like the Online Safety Bill extended to online advertising.’

The warning is the strongest intervention yet from the City watchdog over the issue.

As previously revealed by the Mail, the FCA is spending nearly £600,000 per year on Google adverts to warn consumers about investment scams.

But it is locked in a battle with fraudsters who are also spending millions on adverts, while Google makes money from both sides.

Google insists it is taking measures to ‘tackle the scale of this increasing issue’, including joining a task force set up by banks to exchange information quickly. 

But critics say that these voluntary efforts do not go far enough and are calling for the firm and Facebook, the other major digital advertising provider, to be given a legal responsibility for rooting out investment scams from their platforms.

Our Stamp Out Investment Fraud campaign demands that ministers make this part of the Online Safety Bill and is backed by Britain’s biggest banks, insurers and wealth managers.

UK Finance, which represents banks and is supporting the campaign, warned that the vast majority of financial scams now originated online.

This includes a shocking 96 per cent of investment fraud. And UK Finance boss David Postings warned that the proceeds of the ‘devastating’ scams were being used to fund organised crimes like terrorism, drug trafficking and child sexual exploitation.

He added: ‘The banking and finance industry is continuing to tackle fraud on all fronts, but there is a limit to what we can do alone.

‘We’re pleased that the upcoming Online Safety Bill will tackle some aspects of fraud but it won’t protect people from all fraud that takes place online.

‘This leaves a large proportion of the public at high risk of being scammed online, because criminals are experts in adapting their tactics to exploit any loopholes.’