FCA Voices Concerns About “Epidemic” Levels Of Fraud In The UK
In a recent speech given at the Cambridge Economic Crime Symposium, the Chairman of the Financial Conduct Authority (FCA), Charles Randell, discussed the growing “epidemic” of fraud across the UK, and the need for collaboration in both the public and private sectors to fight more effectively against investment fraud.
His concerns are justified based upon the latest Crime Survey of England and Wales. The survey shows a striking increase in fraud. It reports that there were over 3.8 million cases of fraud affecting individuals during the 2018/2019 period, while the private sector is losing £140 million every year as a consequence of financial fraud. Randell believes lessons needed to be learned from the way the pensions freedom policy was rolled out without the necessary safeguards in place against skimming and scanning as “five million pension savers are now at risk of falling for the tactics used by scammers.” He stated that there needs to be an overhaul of a system that is “not right” and due diligence must be completed in order to better protect the public from scammers.
What can be can be done?
As it stands, the FCA can supervise and investigate firms carrying on regulated activities. FSMA gives the FCA the power to prosecute on a number of criminal offences, including carrying on unauthorised offences and misleading market statements in relation to certain investments. The FCA can also bring private prosecutions against certain offences such as fraud.
The FCA has created a three part strategy for tackling investment fraud:
- Investigating and taking necessary enforcement action in cases of serious misconduct by firms that it regulates and which operate within likely scam markets.
- Educating consumers to the risk of financial scams. Since 2014, the FCA has been running a ScanSmart campaign providing people with tips to help reduce the risk of being scammed.
- Where possible, shutting down unauthorised investment scams.
However, the FCA is facing a number of obstacles in its fight to curb investment fraud. There is a limit to what the FCA can do when many scams involve financial products which are not regulated by the FCA under FSMA. It does not have the resources to investigate and prosecute all the financial crime that other agencies don’t pursue. Randell argued, as a consequence of these limitations, better collaboration among sectors and agency bodies is needed in order to more effectively integrate fraud prevention into their policies.
More help needed
Although the FCA is making aggressive efforts to tackle fraud, Randell acknowledged resources are stretched and called upon major companies step up and do more to help. He highlighted how companies often help to enable fraud through their promotion of advertisements for internet scams and failure to safeguard people’s personal data.
Randell praised Facebook for investing in anti-scam protections but warned that other major companies must follow suit and use their “extraordinary resources to work with law enforcement and regulators to develop algorithms and machine learning tools to identify potentially fraudulent content.” He added that at a minimum, technology corporates should be able to take down any suspected fraudulent content should the authorities request it.