The chairman of the financial watchdog has urged Internet giants such as Facebook and Twitter to rid their platforms of the scourge of online scams.
Charles Randell, who heads the Financial Conduct Authority (FCA), said social media firms are enabling criminals to lure in unsuspecting investors — especially through adverts for so-called crypto tokens.
Randell added that Internet giants must do more to prevent scam adverts appearing on their sites. And in a broadside at Boris Johnson's government, he urged ministers to include financial harm in the Online Safety Bill, forcing firms to check the authenticity of their advertising customers.
Speaking at the Cambridge International Symposium on Economic Crime, the 63-year-old said: 'Google has committed to stop promoting advertisements for financial products unless an FCA-authorised firm has cleared them. Google is doing the right thing and we will monitor the impact of its changes closely.
'We now need other online platforms — Facebook, Microsoft, Twitter, Tiktok — to do the right thing too. And we think that a permanent and consistent solution requires legislation.' He noted that the Government's proposal to include a small number of financial harms in the bill, such as where an individual criminal sends online messages to a victim to con them out of their money, were 'welcome'.
'But paid-for advertising, the main source of online investment scams, is still not covered — we consider it should be,' he added.
The Mail's Stamp Out Investment Fraud campaign calls for financial harm to be included in the Online Safety Bill, with support from industry giants such as Lloyds Bank, HSBC, Aviva and Hargreaves Lansdown.
But so far, Culture Secretary Oliver Dowden has refused to widen the scope of the Bill.
Randell compared cleaning up the Internet to the mythical hero Hercules' task of cleaning out the Augean stables, and said government, the National Crime Agency, the Serious Fraud Office, police forces and regulators like the FCA must work together.
'The first website was published 30 years ago last month. And like the Augean stables, over the last 30 years the Internet has filled up with a great deal of, well, let's just call it "problematic content",' he said. 'People used to think of the Internet as a free space, outside the law, impossible to regulate. And while there's no doubt that it has enabled businesses to innovate and grow in ways that serve us well, their awesome power must be matched with responsibility.'
The FCA has become particularly worried about online adverts for crypto-currencies, like bitcoin, and other digital tokens.
None of these speculative products are related to a physical asset such as gold, so their value can fluctuate wildly. Some are deemed even riskier than the original bitcoin, as their creators have not published an explanatory 'white paper' so users have little idea of how they function.
And many crypto tokens are now being touted by celebrities such as Kim Kardashian and Mike Tyson, who get paid by the crypto companies for hauling in new users. Randell said around 2.3m Britons own some sort of crypto-currency-like product — and that worryingly, 14% of those had borrowed money to buy them, leaving them exposed to even greater losses if the value of the token tumbles.
Another 12%, or a quarter of a million people, thought they would be protected by the FCA or the Financial Services Compensation Scheme if their bets went wrong. 'They won't,' Randell said, explaining that crypto products do not fall under the regulator's scope.
Randell, a former partner at law firm Slaughter and May, conceded that crypto-currencies could have some valuable uses — which may make the case for regulation stronger. But if Parliament did decide to bring crypto assets under the FCA's scope, the regulator is worried that this could lead consumers to think all such products are 'bona fide investments'.
For now, Randell said, the Treasury should change the law so the FCA can regulate crypto promotions and adverts.
International regulators should also start looking at authorised firms which offer crypto products, such as some banks, and make sure they are fully accounting for the risks which those products represent, he added. – Daily Mail, London/Tribune News Service