Remember LCF’s mini-bonds? MPs urge the government to include fraud in Online Safety Bill
Investment fraud could go on for years undetected and wreak havoc for many. That’s what happened two years ago with London Capital & Finance (LCF). The firm had advertised its mini-bonds attracting 11,600 investors. The firm collapsed, causing more than £200 million in losses. LCF had paid £20 million for Google to display its online advertisement, which attracted many investors to this ill-fated scheme.
Now, MPs are warning against similar scandals unless the Online Safety Bill tackles investment fraud. MPs on the Treasury committee are urging the government to act and crack down on online financial product adverts to prevent such disasters. They’re demanding that the Online Safety Bill include online advertising in its scope. That way, internet companies would check the credentials of the companies asking to promote their advertisements online.
The move follows the Mail’s Stamp Out Investment Fraud campaign that also calls on the government to cover financial fraud and false advertising in the bill. According to Mel Stride, LCF’s collapse highlighted regulatory failings. It’s still unclear if the government will include fraudulent advertising in the scope of the bill. She added that it’s important to address the issue to prevent such mishaps in the future.
Regulators and industry giants like HSBC, Hargreaves Lansdown, Lloyds Bank, and Aviva are backing the Mail’s campaign. Still, Olive Dowden, the Culture Secretary, has refused to widen the bill’s scope. According to the Treasury committee, the Financial Conduct Authority (FCA) should expand its reach, and ministers should urgently intervene to allow it.
The Treasury insists that the legal framework should oblige internet platforms to remove scam ads. Last month, Nikhil Rathi, FCA chief executive, also voiced that such amendments be included in the bill that’s working its way through Parliament. Despite the lobbying, ministers insist that the right way to tackle scam ads isn’t through the bill.
Online social media platforms are facing several accusations around aiding fraudulent online investment scams to reach their goal. Debbie Crosbie, from TSB, condemned tech giants like Facebook, LinkedIn, Google Hangouts, Instagram, and Twitter for their role in allowing such scams. She added that such platforms aren’t simply helping the fraudsters, they’re also making money off them.
The fraudsters’ success has increased due to the pandemic that led many investors to conduct their finances online. According to figures from UK Finance, savers lost £135.1 million to investment scams, a rise of 42% year on year. The total number of victims also increased by 32% to reach 8,958, with losses averaging at £15,000 per case compared to £14,000 previously.
As it stands, the bill addresses some online fraud but doesn’t include ad, email, or cloned website scams. Charles Randell, FCA head, also voiced his concerns over lurking criminals targeting investors, specifically through crypto-token adverts.
He added that some 2.3 million people in the UK have invested in quasi-crypto-currency products, and 14% had borrowed money to do so. Millennials have used their credit cards or student or other loans to finance their crypto holdings. Another 12% thought the FCA would protect them if something went wrong, but cryptocurrencies don’t fall with the FCA’s scope. Randell reiterated that the law should change to allow the FCA to regulate crypto promotions and ads.
In the meantime, investors have to play detective to make sure their investments aren’t threatened. To protect your investments, get in touch with one of the financial advisers in London.
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