Across the United Kingdom,
various forms of financial scams are rampant. In fact, according to UK
Finance’s 2021 Annual
Fraud Report,
over £1.3bn was stolen by fraudsters last year.
Of the stolen amount, unauthorized
financial fraud losses through payment cards, remote banking and check totaled
£730.4 million in 2021.
Luckily, banks and card
companies were able to fence off £1.4 billion in unauthorized fraud.
Regardless, UK Finance, which
represents about 300 firms scattered across the country, recorded 195,996
incidents of authorized push payment (APP) scams.
APP is a type of scam where
victims of fraud are deceived into making a payment to an account controlled by
a con artist.
Victims of these types of
scams lost grossly £583.2 million in 2021, according to the fraud report.
In fact, UK Finance in the
report disclosed that APP fraud rose by 27% in 2021 as more people worked from
home following the pandemic.
Additionally, UK Finance categorizes authorized
push payment scams into two broad categories: malicious payee and malicious
redirection scams.
Malicious payee scams include
purchase, investment, romance and advance-fee scams.
On the other hand, malicious redirection scams
include invoice, mandate, CEO fraud and impersonation
scams.
This means that an investment
scam is a type of push payment scam.
Soaring Investment Scams in
the UK
According to UK Finance, victims
lost £171.7 million in 2021 to investment scams.
Investment scams happen when
a criminal convinces their victim to move their money to a fictitious fund or
to pay for a fake investment. They achieve this by promising a very high
return.
“These scams include
investment in items such as gold, property, carbon credits, cryptocurrencies,
land banks and wine,” UK Finance explained.
Also, according to the
professional body, although investment scams accounted for only 6% of the total
number of authorized push payment scam cases in the UK in 2021, they accounted
for the largest proportion (29%) of losses from all eight APP scam types.
This is due to their nature, the level of sophistication of the criminals involved and the higher sums
involved.
Cases of investment scams in the UK jumped by almost half in 2021.
Moreover, UK Finance’s data shows
that losses from investment scams skyrocketed 57% in 2021. Similarly, the total
number of cases of investment scams surged 48% to 12,074 cases,
However, the data shows
that the value of funds returned to investors jumped 86% from £40.2
million to £74.6 million.
Vince Howard, the Marketing
Director of Opis Group Limited, a British blockchain technology company, told
Finance Magnates that a lack of complete oversight from the government on the emerging financial ecosystem means there will be little impact on efforts to stop
scammers.
“Cryptocurrency and blockchain technology are
relatively new, and given that, scams are happening all too often, and the UK
is no exception,” Howard said.
“The crypto winter has led to
an increase in this trend, with the play-to-earn space as ripe for scammers,”
he added.
FCA and the Fight against
Investment Scams
Between May 2021 and April
2022, the UK Financial Conduct Authority (FCA) added 1,966 possible scams to
its consumer warning list.
The financial market watchdog
said this figure was over a third greater than the number it raised the alarm on
in 2021.
The FCA said this action forms
parts of its data strategy which was first
published in
2013, reworked in January 2020, and updated
in
2022 to “become a more innovative, assertive and adaptive regulator.”
The UK Financial Conduct Authority’s (FCA) Data Strategy Breakdown. Source: FCA
The data strategy, FCA
explained, is targeted at improving its use of data to identify and prevent
harm faster.
Furthermore, the data strategy
is a part of the FCA’s broader Our Strategy
2022-2025.
This all-encompassing
strategy aims to reduce and prevent serious harm, set and test higher standards,
and promote competition and positive change.
Fighting Scams with Data:
How’s the FCA Doing?
The FCA in an update to its data
strategy explained that it has created data science units across various
offices in its establishment.
These units, it said, work
closely with experts in the financial services sector to analyze risks, triage
cases and automate processes to detect harm more quickly and protect consumers.
The market supervisor also
said it is employing analytical tools and new sources of data to identify
high-risk financial adverts.
Last year, the regulator
flagged 564 high-risk financial adverts which were either amended or withdrawn. The FCA said this doubled the number it raised the alarm on in 2020.
Furthermore, the independent
authority said it has been using web scraping to identify potential scams.
The FCA explained, “We are
scanning an average of 100,000 websites created every day to identify newly
registered domains that show the characteristics that could be used for scams
or fraud.
“Where we identify a
fraudulent or illegal website, we publish a warning to consumers and write to
the website’s registrar to request it [to be] taken down.”
Among other things, the FCA said
it has continued to maintain its collaboration with the Bank of England to
improve the quality of the data it collects.
But, are all these enough? Is
the FCA doing enough to significantly stem the tide of investment scams in the
United Kingdom?
Kunal Sawhney, the CEO of
Kalkine Group, an independent equities research form, told Finance Magnates that the regulator “appears to have
improved its ability to deal with scams as they arise.”
“Notably, by examining
approximately 100,000 websites established every day to find those that seem to
be scams, the FCA is utilizing data to combat online fraud more quickly,” Sawhney
said.
Kunal Sawhney, the CEO of Kalkine Group
He added, “In April, the FCA
instructed Meta and Twitter to take measures to stop fraud assaults on social
media platforms, which have risen in recent months.”
On top of that, Sawhney noted that
the embracing tech-driven solution is strengthening the FCA.
“Apart from monitoring
websites, implementing a sanctions-screening tool to help the monitoring
entities or people who have been sanctioned is one of the FCA’s other
technological efforts,” he explained.
However, the CEO of the Kalkine Group noted that FCA’s ability to utilize its investigative powers to only look
into regulated businesses or offences is a major weakness.
“The Financial Services and Markets Acts 2000
(FSMA) does not grant the FCA any legislative authority over fraud, and any
accusations of fraud that are brought are the result of private prosecutions
that fall beyond the FCA’s statutory purview,” the CEO said.
Speaking at the City &
Financial Global-FCA Investigations & Enforcement Summit in 2021, Mark
Steward, FCA’s Executive Director of Enforcement and Market Oversight, noted
that the regulator had doubled
down on its proactive monitoring of the internet with “a dragnet
approach.”
Steward noted that the regulator’s
goal is to capture suspicious advertising on the same day or 24 hours after it
first appears.
However, the executive
admitted the limit of the FCA in terms of fighting investment scams.
According to him, the FCA can
only prosecute fraud as a private prosecutor.
The Executive Director pointed out that the FSMA, which dictates the FCA’s powers and remit, does not
invest the regulator with any general power or authority to prosecute
fraud.
Steward explained: “The FCA’s
investigation powers can only be used to investigate regulated firms or those
offences prescribed in Section 168 of the FSMA which does not include fraud.
“The FCA has no statutory
power in respect of fraud and, if fraud charges are brought, they are private
prosecutions, outside the ambit of the statutory remit given to the FCA by
FSMA.”
Furthermore, Steward pointed out the
limitation of the authority’s enabling legislation in terms of overseeing the
internet.
He explained: “The internet
and social media have largely been unregulated. While Section 21 of
the Financial Services and Markets Act 2000 prohibits the communication
of invitations or inducements to engage in investment activity by persons other
than those issued or approved by FCA authorized firms, there is an exemption
for electronic communications in which the person is merely a conduit for
content generated by another person.”
Way Out
The regulatory limit of the
FCA’s power in terms of prosecuting fraud is probably due to the existence of other
authorities charged with fighting fraud.
For example, there is the National
Crime Agency, the national law enforcement agency in the UK. There is also Action
Fraud, the UK’s national reporting centre for fraud and cybercrime.
However, if the FCA must
truly fight investment scams, in particular, it will need more regulatory backing.
This will help to put the scourge of investment scams in the country in
check.
Also, Sawhney believes that
the FCA must foster innovation to prepare for the future by using data analytics
to regulate at scale.
“The FCA should speed up the
development of a digital unified intelligence environment (DUIE) which could
improve its ability to foresee harm and safeguard customers,” he explained.
Across the United Kingdom,
various forms of financial scams are rampant. In fact, according to UK
Finance’s 2021 Annual
Fraud Report,
over £1.3bn was stolen by fraudsters last year.
Of the stolen amount, unauthorized
financial fraud losses through payment cards, remote banking and check totaled
£730.4 million in 2021.
Luckily, banks and card
companies were able to fence off £1.4 billion in unauthorized fraud.
Regardless, UK Finance, which
represents about 300 firms scattered across the country, recorded 195,996
incidents of authorized push payment (APP) scams.
APP is a type of scam where
victims of fraud are deceived into making a payment to an account controlled by
a con artist.
Victims of these types of
scams lost grossly £583.2 million in 2021, according to the fraud report.
In fact, UK Finance in the
report disclosed that APP fraud rose by 27% in 2021 as more people worked from
home following the pandemic.
Additionally, UK Finance categorizes authorized
push payment scams into two broad categories: malicious payee and malicious
redirection scams.
Malicious payee scams include
purchase, investment, romance and advance-fee scams.
On the other hand, malicious redirection scams
include invoice, mandate, CEO fraud and impersonation
scams.
This means that an investment
scam is a type of push payment scam.
Soaring Investment Scams in
the UK
According to UK Finance, victims
lost £171.7 million in 2021 to investment scams.
Investment scams happen when
a criminal convinces their victim to move their money to a fictitious fund or
to pay for a fake investment. They achieve this by promising a very high
return.
“These scams include
investment in items such as gold, property, carbon credits, cryptocurrencies,
land banks and wine,” UK Finance explained.
Also, according to the
professional body, although investment scams accounted for only 6% of the total
number of authorized push payment scam cases in the UK in 2021, they accounted
for the largest proportion (29%) of losses from all eight APP scam types.
This is due to their nature, the level of sophistication of the criminals involved and the higher sums
involved.
Cases of investment scams in the UK jumped by almost half in 2021.
Moreover, UK Finance’s data shows
that losses from investment scams skyrocketed 57% in 2021. Similarly, the total
number of cases of investment scams surged 48% to 12,074 cases,
However, the data shows
that the value of funds returned to investors jumped 86% from £40.2
million to £74.6 million.
Vince Howard, the Marketing
Director of Opis Group Limited, a British blockchain technology company, told
Finance Magnates that a lack of complete oversight from the government on the emerging financial ecosystem means there will be little impact on efforts to stop
scammers.
“Cryptocurrency and blockchain technology are
relatively new, and given that, scams are happening all too often, and the UK
is no exception,” Howard said.
“The crypto winter has led to
an increase in this trend, with the play-to-earn space as ripe for scammers,”
he added.
FCA and the Fight against
Investment Scams
Between May 2021 and April
2022, the UK Financial Conduct Authority (FCA) added 1,966 possible scams to
its consumer warning list.
The financial market watchdog
said this figure was over a third greater than the number it raised the alarm on
in 2021.
The FCA said this action forms
parts of its data strategy which was first
published in
2013, reworked in January 2020, and updated
in
2022 to “become a more innovative, assertive and adaptive regulator.”
The UK Financial Conduct Authority’s (FCA) Data Strategy Breakdown. Source: FCA
The data strategy, FCA
explained, is targeted at improving its use of data to identify and prevent
harm faster.
Furthermore, the data strategy
is a part of the FCA’s broader Our Strategy
2022-2025.
This all-encompassing
strategy aims to reduce and prevent serious harm, set and test higher standards,
and promote competition and positive change.
Fighting Scams with Data:
How’s the FCA Doing?
The FCA in an update to its data
strategy explained that it has created data science units across various
offices in its establishment.
These units, it said, work
closely with experts in the financial services sector to analyze risks, triage
cases and automate processes to detect harm more quickly and protect consumers.
The market supervisor also
said it is employing analytical tools and new sources of data to identify
high-risk financial adverts.
Last year, the regulator
flagged 564 high-risk financial adverts which were either amended or withdrawn. The FCA said this doubled the number it raised the alarm on in 2020.
Furthermore, the independent
authority said it has been using web scraping to identify potential scams.
The FCA explained, “We are
scanning an average of 100,000 websites created every day to identify newly
registered domains that show the characteristics that could be used for scams
or fraud.
“Where we identify a
fraudulent or illegal website, we publish a warning to consumers and write to
the website’s registrar to request it [to be] taken down.”
Among other things, the FCA said
it has continued to maintain its collaboration with the Bank of England to
improve the quality of the data it collects.
But, are all these enough? Is
the FCA doing enough to significantly stem the tide of investment scams in the
United Kingdom?
Kunal Sawhney, the CEO of
Kalkine Group, an independent equities research form, told Finance Magnates that the regulator “appears to have
improved its ability to deal with scams as they arise.”
“Notably, by examining
approximately 100,000 websites established every day to find those that seem to
be scams, the FCA is utilizing data to combat online fraud more quickly,” Sawhney
said.
Kunal Sawhney, the CEO of Kalkine Group
He added, “In April, the FCA
instructed Meta and Twitter to take measures to stop fraud assaults on social
media platforms, which have risen in recent months.”
On top of that, Sawhney noted that
the embracing tech-driven solution is strengthening the FCA.
“Apart from monitoring
websites, implementing a sanctions-screening tool to help the monitoring
entities or people who have been sanctioned is one of the FCA’s other
technological efforts,” he explained.
However, the CEO of the Kalkine Group noted that FCA’s ability to utilize its investigative powers to only look
into regulated businesses or offences is a major weakness.
“The Financial Services and Markets Acts 2000
(FSMA) does not grant the FCA any legislative authority over fraud, and any
accusations of fraud that are brought are the result of private prosecutions
that fall beyond the FCA’s statutory purview,” the CEO said.
Speaking at the City &
Financial Global-FCA Investigations & Enforcement Summit in 2021, Mark
Steward, FCA’s Executive Director of Enforcement and Market Oversight, noted
that the regulator had doubled
down on its proactive monitoring of the internet with “a dragnet
approach.”
Steward noted that the regulator’s
goal is to capture suspicious advertising on the same day or 24 hours after it
first appears.
However, the executive
admitted the limit of the FCA in terms of fighting investment scams.
According to him, the FCA can
only prosecute fraud as a private prosecutor.
The Executive Director pointed out that the FSMA, which dictates the FCA’s powers and remit, does not
invest the regulator with any general power or authority to prosecute
fraud.
Steward explained: “The FCA’s
investigation powers can only be used to investigate regulated firms or those
offences prescribed in Section 168 of the FSMA which does not include fraud.
“The FCA has no statutory
power in respect of fraud and, if fraud charges are brought, they are private
prosecutions, outside the ambit of the statutory remit given to the FCA by
FSMA.”
Furthermore, Steward pointed out the
limitation of the authority’s enabling legislation in terms of overseeing the
internet.
He explained: “The internet
and social media have largely been unregulated. While Section 21 of
the Financial Services and Markets Act 2000 prohibits the communication
of invitations or inducements to engage in investment activity by persons other
than those issued or approved by FCA authorized firms, there is an exemption
for electronic communications in which the person is merely a conduit for
content generated by another person.”
Way Out
The regulatory limit of the
FCA’s power in terms of prosecuting fraud is probably due to the existence of other
authorities charged with fighting fraud.
For example, there is the National
Crime Agency, the national law enforcement agency in the UK. There is also Action
Fraud, the UK’s national reporting centre for fraud and cybercrime.
However, if the FCA must
truly fight investment scams, in particular, it will need more regulatory backing.
This will help to put the scourge of investment scams in the country in
check.
Also, Sawhney believes that
the FCA must foster innovation to prepare for the future by using data analytics
to regulate at scale.
“The FCA should speed up the
development of a digital unified intelligence environment (DUIE) which could
improve its ability to foresee harm and safeguard customers,” he explained.
