5 July 2021

The global scamdemic that’s robbing people of their life savings

By

“I felt completely sick.”

63-year-old Maria Teresa Jackson recounts the moment she found out scammers had made off with £120,000 of her life savings.

“I get flashbacks of certain events and that upsets me a lot.”

She had invested in a cryptocurrency trading scheme which began as an advert on a social media site. But the investment was a fake; the advertisement, the professional looking website and the dedicated sales manager had all been a lie.

Maria Teresa’s story is one of many being told by consumer champion Which? in their hard-fought campaign for online platforms to do more to protect their users.

Unsurprisingly, the shift to online working and socialising throughout the pandemic has resulted in a dramatic increase in people falling for online scams. Group-IB, a cyber intelligence company which hunts online threats, named 2020/21 the year of the ‘global scamdemic’, with scams rising to become the number one online crime in that time.

But gone are the days of the ‘too good to be true’ pop-up letting you know that you’ve won a brand-new iPhone. Today’s online scams are far more sophisticated and subtle.

Modern cyber scammers earn their crust by posing as real companies. They impersonate real sales managers, offer reasonable products at going market rates, and even fake regulatory watermarks. These so called ‘clone scams’ cost the British public £78 million in 2020 – or about £150 a minute – with individual losses in the region of £45,000 per victim.

Now, if you are reading this and thinking, ‘but this couldn’t possibly happen to me? I could spot a scam a mile off’, then you wouldn’t be alone in this view. In a recent study by the Financial Conduct Authority, three quarters (75%) of investors said they felt confident they could spot a clone scam.

However, 77% went on to admit they did not know what a ‘clone investment firm’ even was.

You would be forgiven for thinking that online platforms carry out background checks on advertisers and profiles on their platform – as has long been the case with print media, TV and radio. When consumers see the stamp of an advert, whether that’s on Google, Facebook or any other platform, they believe it is an official advert from the company in question.

Google has been working with the FCA to address the issues of scams on its services. In June it announced that anyone looking to advertise financial services must be listed on the FCA’s approved register of firms.

While these measures are certainly a big step in the right direction, our fight against fraudsters is far from over; when one door shuts, criminals will always find another.

Let’s leave scammers nowhere to turn. All major online platforms must start performing stringent checks at the gateway to verify the identity of anyone looking to advertise on their sites and take down anyone who fails to comply.

It isn’t just search engines and social media sites that play host to scammers. According to Which? reports filed by victims of ‘romance scams’ skyrocketed over lockdown, with reported losses totalling £73.9 million in 2020.

In this particularly cruel kind of scam, organised cyber criminals ‘catfish’ their victims, earning the trust and affection of a distant romantic – often vulnerable – partner, only to dupe them into handing over large sums of money on false pretences. This is taking place on well-known dating sites and apps, as well as on social media, and it’s likely that the true number is much higher as many people are too embarrassed to report it.

In response to this, the upcoming Online Safety Bill will now bring user-generated online scams, which includes romance scams, into the scope of legislation. But this will only carve out a small portion of the £479 million scammers pocketed last year – online platforms are still left to address the paid advertising content that they carry, not just those generated by users. Government should be prepared to step in if the voluntary steps taken by online platforms aren’t enough.

Finally, more needs to be done to improve compensation for victims. In the case of one of my constituents, my office had to fight hard to help them secure compensation after they were scammed out of £30,000 by a fraudulent advert on Google. Scammers, pretending to be Goldman Sachs, offered a fake bond which had a reasonable rate of return over a three-year period. My constituents transferred the money thinking they were making a sound investment for their future. Instead, they had transferred their hard-earned savings into the bank account of scammers.

In the end, the result was positive, and my constituent was eventually compensated: half from their bank and half from the scammer’s bank. But there is no guarantee of reimbursement when a victim is tricked into transferring money to a scammer and many don’t receive compensation.

These ‘Authorised Push Payment’ (APP) scams leave victims with the burdensome task of having to plead with their bank and law enforcement to help recover their losses. In 2018, The Telegraph reported that, in the previous year, only 25% of the funds lost this way were ever returned to victims. Most recently, the Payment Systems Regulator (PSR) has stated that reimbursement rates are still ‘well below’ where they should be.

One possible solution is to make changes to the Faster Payment Scheme rules. The PSR is currently consulting on this and is expected to report back in Autumn. With 350 people falling for APP scams every day, swift action needs to be taken to level-out the rules on victim compensation.

Whatever approach is eventually taken, this issue cuts across multiple Government departments and regulatory bodies. The final strategy must bring these bodies together for the good of consumers.

With our growing reliance on online services scams will become ever more common. We need to respond with a robust and flexible toolbox of measures which protect consumers and punish perpetrators.

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Ruth Edwards is MP for Rushcliffe.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.