PIMFA calls on UK Government to include economic harm in Online Safety Bill

Thief making of with a sack of stolen money

Attempts to defraud savers through online scams grew in January, evidence collected by PIMFA, the trade association for wealth management, investment services and the investment and financial advice industry, has revealed. 

PIMFA member firms reported numerous attempts to scam consumers including cloned websites, fake celebrity endorsements and social media influencer ‘Get Rich Quick’ scams, impersonation scams, new courier fraud and more besides.

PIMFA is warning all consumers to remain vigilant and ensure the investment firm they are dealing with is regulated and authorised by the Financial Conduct Authority (FCA). PIMFA is also urging the Government to include economic harm in its forthcoming Online Safety Bill. PIMFA and its members believe that, such is the extent of fraud, the only solution is to enshrine in law additional consumer protections that would tackle the growing threat from online fraudsters.

Action Fraud 2020 figures show there were 356,649 reported cases of fraud (1) and an estimated GBP2.1 billion lost to fraudsters. Of the total, investment frauds that encourage consumers to buy unsuitable, or non-existent, investment products, pension liberation scams, Boiler Room scams and Ponzi or Pyramid schemes, accounted for less than 10 per cent of all reported crimes (20,152 reports) but 25 per cent of all financial losses at GBP501 million.

This is in addition to recent figures from Action Fraud, which showed GBP78 millilon was lost to cloned website fraud, where fraudsters copy an investment firm’s website in order to steal from unsuspecting consumers. Given that the National Crime Agency (NCA) believes that only 20 per cent of frauds are ever reported, PIMFA believes the number of victims, and the amount of money lost, to fraud is far, far higher than currently being reported.

Among some of the examples of frauds found were online adverts masquerading as national newspaper articles that involved endorsements of unregulated investment products. One scam impersonated MoneySavingExpert’s Martin Lewis, even going as far as to create a fake tweet from the consumer campaigner. While Lewis has made it abundantly clear he has never endorsed any financial product and despite his consistent efforts to combat such scams, the scammers are persistent and find new approaches so these adverts were still publicly visible on online search platforms in January.

Another fraud involved social media profiles claiming to be linked to a reputable FCA authorised firm that promised consumers they could turn a GBP100 investment into a GBP1000 profit in less than a day, in order to steal their money. Such frauds have become far more prevalent since the onset of the Covid-19 pandemic with the City of London Police even issuing warnings about social media hashtags consumers should be wary of.

Other scams reported in the last month included fraudsters persuading consumers to invest in unregulated schemes or products – often involving virtual currencies – with firms that are often listed on the FCA’s scam warning page. Meanwhile, dozens of fake bond comparison sites created to collect their victims’ data, were found, the majority of which promised high returns on non-existent unregulated bonds the fraudsters claimed were offered by high street banks or wealth managers. 

Liz Field, Chief Executive of PIMFA, says: “The impact of fraud on the financial and mental wellbeing of individuals and their families can be devastating and the figures show that it is becoming an ever-present danger in our daily lives. A large number of victims of fraud lose their entire life savings. We already know the Covid-19 pandemic is causing financial hardship for many people and the danger is that if we don’t act now, as an industry together with the Government and Regulators, online fraud will only get worse."

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