The UK needs to legislate to stop tech giants from profiting from online scam adverts, as losses to savers tricked out of their pension pots were estimated at up to £10bn in the past six years, MPs have recommended.
In a hard-hitting report published on Sunday, the House of Commons work and pensions select committee said a “woeful lack” of regulation over online financial promotions was helping scammers and fraudsters “reach more people than ever before”.
“Regulators appear powerless to hold online firms to account for hosting scam advertisements in the same way they would be able to for traditional media,” said the cross-party committee.
“The result is an online free for all, where scammers can advertise with impunity while the tech giants line their pockets from the proceeds of their crimes.”
The committee said it was “immoral that tech firms such as Google are accepting payment to advertise scams, and then further payment from regulators to warn about the scam”.
“It should not require legislative solutions to deter global firms from benefiting from the proceeds of crime, but unfortunately legislation is clearly needed,” the report said.
Regulations to help protect savers from financial promotional scams only apply to traditional media, such as television and newspapers, but not new media, including Twitter, Facebook and Google.
The government has so far resisted calls to plug this regulatory gap by including investment fraud in its online safety bill, progressing through parliament.
“There must now be parity across the media to ensure all adverts are regulated and the government should use its online safety bill to act,” the committee recommended.
“Tighter online regulation must be just the first step in improving protections for savers.”
The government said that it recognised the concerns about online scams and fraud, and was working with industry, regulators and law enforcement partners “to pursue fraudsters, close down the vulnerabilities they exploit and make sure people have the information they need to spot and report scams.”
“The minister for pensions has been very clear that some tech companies are failing pension savers, that they must do more to crack down on scam adverts and should use their existing powers to stop online scammers using their site to promote fake adverts,” the statement said.
The committee’s report followed an inquiry into how well savers were protected in the wake of wide-ranging 2015 pension freedom reforms, which gave millions of over-55s full freedom on how they took their retirement cash.
In recent years, police and regulators have stepped up efforts to protect savers against the growing risk of investment fraud, where individuals are hoodwinked by promotions into placing their cash into “too good to be true” investment opportunities.
Since the reforms were introduced, more than £30m has been lost to pension scams, according to official estimates from Action Fraud, the UK’s national centre for fraud and cyber crime.
But the committee said this was “indisputably” an underestimate and cited evidence from the Pension Scams Industry Group, an industry body, that £10bn had been lost to pension scams, by 40,000 people, since 2015.
“The situation is likely to be getting worse rather than better,” according to the committee report, which concluded the reputation of Action Fraud had been left “in tatters” by its failure to manage the expectations of victims and a lack of action on cases.
Google said protecting consumers and credible business was a priority.
“We take dishonest business practices and misleading ads very seriously and consider them to be a violation of our policies. When ads do not comply with our policies; we take action to remove them.”
Google said last year it had removed 3.1bn “bad ads” from its platforms, of which 123m were ads related to financial services.
Facebook said it did not allow fraudulent activity and had a dedicated group within its content moderation team policing fake profiles. In 2019, it donated £3m to Citizens Advice to help fund a helpline for scam victims, following a legal campaign against the social network over the issue led by MoneySavingExpert founder Martin Lewis.
Last year the UK’s Advertising Standards Authority launched a “scam ad alert system”, which allows consumers to report suspicious activity to the ad industry watchdog. These alerts are then passed on to Google, Facebook and other online publishers.
Twitter said it had a clear financial scams policy in place, which explicitly banned the use of scam tactics to obtain money or private financial information. “Where we identify violations of our rules, we take robust enforcement action,” it said.
The Department for Culture, Media and Sport, which is sponsoring the online safety bill, did not reply to a request for comment.