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February 2022![Internet Giants Should Reimburse Victims of Scams on Their Platforms, MPs Say (1)](https://www.moneyexpert.com/storage/uploads/2022/02/internet-giants-should-reimburse-victims-of-scams-on-their-platforms-mps-say-1-1644680462tuJpB-medium.jpg)
Internet Giants Should Reimburse Victims of Scams on Their Platforms, MPs Say
The government should mandate reimbursement of victims of bank transfer scams and “seriously consider” whether internet giants should also refund customers who fall victim to fraud under their platforms, a cross-party committee of MPs has said.
The Treasury Committee advanced the recommendations following an examination of economic crime, “a major and rapidly growing problem in the UK” but one the government and law enforcement aren’t doing enough to tackle, the committee said.
Mel Stride MP, Chair of the Treasury Committee, said: “For too long, pernicious scammers have acted with impunity, ripping off innocent consumers with fraudulent online adverts, impersonation scams and dodgy crypto investments.
“Unfortunately, fraud has soared during the pandemic, and as MPs we’ve heard heart-breaking stories of individuals who have fallen victim to these criminals and lost large sums of money.
“While the Government have made some progress in this area, we’re today calling on them to push harder and act faster on the growing fraud epidemic,” Stride added.
As it did in 2019, the Treasury Committee is calling for the government to legislate to require banks to reimburse victims of authorised push payment (APP) fraud, also called bank transfer schemes. In this type of fraud, consumers are conned into sending money to criminals, who they may believe are legitimate tradespeople, real companies, or genuine love interests. Already common online, bank transfer scams soared during the pandemic, with losses up 71% in the first half of 2021 to £355.3 million. That meant losses from bank transfer scams exceeded the funds lost through credit card fraud for the first time ever.
Under a system in force since May 2019, many high-street banks have voluntarily committed to make these refunds. However, even participating banks have different policies on reimbursement, creating a refund lottery that leaves some fraud victims unable to recoup their losses.
Legislation to pave the way for mandatory refunds of fraud victims is already in the works. In November, the Payment Systems Regulator (PSR) began consulting on a compulsory reimbursement scheme, and the Treasury confirmed it will “legislate to address barriers to [this] regulatory action at the earlier opportunity.”
But the Treasury Committee believes this should be done “urgently.”
“The Treasury should be ready to bring forward any legislation which is needed to enable this, and the PSR should ensure that banks act quickly in putting in place the necessary changes,” member MPs urged.
But it isn’t just banks that should be required to refund consumers victimised by fraudsters. The government should also “seriously consider whether online companies should be required to contribute compensation when fraud is conducted using their platforms,” MPs said. This could mean social media giants handing money back to consumers.
The committee says that these companies currently profit from fraudsters’ use of their platform, especially through the sale of advertisements for financial products and services that are either fraudulent or not compliant with regulations, like scam cryptocurrencies. Therefore these companies have no financial incentive to tackle crime. But giving them the responsibility for refunding victims “could rapidly transform their approach to fraud,” the committee said.
The government should also legislate against fraudulent adverts on these platforms. One way of tackling scam adverts would be to legally require that these platforms “Know Your Customer,” as financial services companies are required.
The Treasury Committee acknowledges that the UK has a long way to go tackling online fraud.
“Some of our recommendations, such as legislating against online scam adverts, can be implemented quickly. Others, including crypto regulation…., will require a longer-term approach. Taken together, our proposals give the UK a fighting chance to get back on the front foot and stop these scammers in their tracks,” Stride said.