You have been warned: the FCA’s messages to banks and social media about online scams

The proliferation of online scams and frauds won’t be news to anyone: we’ve all seen the online adverts, received the text messages and some of us will even have spoken first-hand to criminals trying to separate us from our funds (but that’s a whole other post…). Yet, despite the seeming ubiquity of fraud and scams, just 1% of police resources are dedicated to investigating and tackling the offence. 

The FCA are increasingly filling the void by taking action directly against the criminals behind the scams (with 50 ongoing investigations involving 183 suspects), but also by sending out tough warnings to financial services firms and social media platforms that may be unwittingly facilitating the scams.

The FCA Warning List

In a speech last week, Mark Steward, the Executive Director of Enforcement and Market Oversight at the FCA, explained that the FCA’s “dragnet” was now able to identify and place suspicious online investment adverts on its “Warning List” within a day. 

Mr Steward warned financial services firms that the Warning List should be an “essential component of [their] systems and controls inhibiting financial crime ”: with FCA-authorised firms expected to use the list in conducting due diligence on prospective or current customers. Those who “let down their guard” and assist firms on the Warning List – even if inadvertently - can expect to face enforcement action.

 Impact for social media

For the social media firms, the warning from Mr Steward was just as clear. The FCA’s view is that, where social media firms are providing any “value adding services” (such as hosting advertisements), they are required to comply with section 21 of FSMA (something we wrote about in more detail here and here).This would mean that social media firms would need to ensure that financial promotions communicated through “value adding services” on their sites (like adverts) had been approved by an “authorised person” or be exempt from that requirement. 

Mr Steward echoed that words of the FCA CEO in saying that, if the FCA don’t see effective compliance, they are prepared to act. As explained in our previous posts, a breach of the financial promotions rules is a criminal offence.

 Firms and social media need to up their game

The FCA’s proactive stance on scams is to be commended, not least because the FCA does not have a general power or authority to prosecute fraud. In a similar fashion, it clearly expects those who wouldn’t see preventing fraud as their core mission – financial services firms and social media – to do their bit to tackle the scourge of online fraud and scams. 

Those who don’t, in the words of Mr Steward, “up their game” can expect the FCA to take robust action.