Tackling Online Fraud and Scams: Ofcom and FCA Collaboration

The prevalence of online fraud

The internet has revolutionised the way we communicate, seek information and spend our money in incredibly important ways including seeking financial advice, saving and investing. It is a vital resource, but sadly one where too often consumers are exploited by criminals.               

One of the main risks to consumers in the digital world is fraud. Fraud is the most frequently experienced crime in the UK, accounting for 39% of all reported crime in England and Wales. [1] There were recorded losses of almost £1.2 billion to fraud in 2023. [2]

Fraud perpetrated online is a particular issue. Research carried out on behalf of Ofcom found that nearly 9 in 10 adult internet users (87%) have encountered content online which they believed to be a scam or fraud. [3] Evolution in technology will pose further risk, with generative AI developments providing additional tools to criminals, such as using deepfakes for scams. [4]

Fighting fraud requires a collective effort from Government, law enforcement, regulators and industry. 

The FCA’s response

In recent years, the FCA has played a leading role in keeping consumers safe using all its available tools to protect consumers – from proactive and reactive supervision of systems and controls in the financial sector, to scanning 100,000 websites every day to identify potential scams, looking into consumer scam reports, issuing over 14,000 potential scam alerts, working with key partners, and taking enforcement against firms and individuals. This year the FCA has charged 9 influencers in relation to illegally promoting unauthorised investments and is interviewing 20 influencers under caution who may be touting financial services products illegally.

Following ongoing engagement with the FCA, Google, Bing (Microsoft), Meta, X and TikTok have all changed their policies to only permit paid-for ads for financial services, including investments, by advertisers that are authorised by the FCA. This has significantly reduced the volume of paid-for scam ads on these services – but scams and other illegal financial promotions remain too prevalent in material not subject to these policies. This includes sponsored ads, as well as user generated content like posts and influencer marketing that promotes unauthorised investments, 'get rich quick’ schemes, debt solutions and other financial services.

The Online Safety Act and working together under the DRCF

In October last year, the Online Safety Act 2023 received Royal Assent and established in UK law further protections for consumers from online harms like fraud and scams. Under the law, online services must assess the risk of harm to users from illegal content and take effective steps to manage and mitigate it.

A key priority for Ofcom as the new online safety regulator is reducing fraud. Ofcom has moved quickly to implement the new regime and propose codes of practice and guidance through its Illegal Harms Consultation. [5] These will help ensure providers of regulated online services comply with their obligations.

This has involved working closely with the FCA under the DRCF workstream ‘Illegal Online Financial Promotions’ to identify the overlap between platforms’ obligations under the online safety regime and financial services legislation, and to leverage each other’s expertise and improve regulatory clarity for online services.

For example, two key elements in the Illegal Harms Consultation in November 2023 have been shaped by this regulatory collaboration:

a.      The ‘Dedicated Reporting Channel’ measure in Ofcom’s draft codes of practice proposes that large user-to-user and search services [6] at medium or high risk for fraud should have a mechanism for named expert law enforcement organisations, including the FCA, to submit reports of fraud related offences.

b.      The Consultation included guidance to assist all services in the removal of fraudulent content and illegal financial promotions by providing relevant considerations for judging whether content is illegal. Ofcom and the FCA’s close working relationship played a crucial role in the development of this guidance, which includes references to key FCA tools like the FCA Warning List, bringing them to the attention of services. 

Next steps

Ofcom will publish its final codes of practice and guidance in December, having received valuable feedback from a range of stakeholders, including those from civil society, law enforcement and financial services.  All providers of services in scope of the Act must then complete their risk assessments by mid-March 2025. Once the Codes of Practice have passed through Parliament, those service providers will need to take the steps laid down in the codes or use other effective measures to protect users and Ofcom can enforce against non-compliance.

Looking ahead, there will be a future Ofcom consultation [7] on a distinct code of practice relating to fraudulent advertising. The code will recommend measures for how relevant services can prevent fraudulent advertisements appearing and swiftly remove them once aware of them.

The FCA and Ofcom will continue to work together closely in our shared objective to reduce consumers’ exposure to fraud online. Our collaboration under the DRCF will ensure that the FCA’s expertise in illegal financial promotions informs development of Ofcom’s future work. We will also continue to explore the interaction of this work with that of other regulators, including the ICO’s work to support data sharing for the prevention of scams and fraud.

Our work together will be vital to deliver better protections from fraud and scams, as well as establishing a coherent approach to digital regulation for business and people in the UK.