Charles Randall said in a speech at the Cambridge Economic Crime Symposium on 4 September: “Financial crime, specifically fraud against individuals, has reached epidemic proportions.”
This comes after International Adviser reported on a Lloyds Bank survey that found 10% of all UK adults fall victim to financial scams.
“The FCA is committed to making all the changes necessary so that it can be as good as it can be in contributing to the fight against the scammers,” Randall told the audience.
“We can and must get better. But we will be more effective if the system is more coherent.”
Scary statistics of financial crime
The number of people affected by fraud or a scam is frightening.
The 2018/19 Crime Survey for England and Wales found there were 3.8 million cases of fraud affecting individuals, a third of all crimes.
The Office for National Statistics revealed that fewer than one-in-six incidents are reported to the police or Action Fraud.
Randall added: “Fraud is a huge problem. It is the most common crime in the country.
“And this volume of fraud has consequences which go well beyond the financial losses involved.
“Fraud can destroy not just the victim’s savings but also their mental and physical wellbeing.”
Who needs to step up to the plate?
Every problem needs a hero.
But the question is who should it be?
“Even if we had the powers to do so, the FCA couldn’t take on the investigation and prosecution of all investment activity,” said Randall.
“We certainly can’t step in to deal with all financial crime which other agencies across the country don’t pursue.
“The scale of the challenge calls for concerted action from everyone involved, pooling our resources and expertise to maximise impact.”
But Randall did highlight the FCA’s priorities in its scam crackdown.
This includes focusing on authorised firms and their regulated activities, alerting consumers to the risks of scams with campaigns like ScamSmart, and also taking action to shut down unauthorised investment business when it can.
Another area where scammers are exploiting is social media, as its creeping influence on society continues to rise.
MoneySavingExpert founder Martin Lewis reached an out-of-court settlement with Facebook, after the company admitted over 1,000 scam adverts abusing his name or image had appeared on the site.
As a result of the court action, over 1,000 fraudulent and misleading ads have been taken down.
“Major companies can effectively enable a huge amount of fraud,” said Randall. “The companies which promote advertisements for scams on the internet and thereby profit from these crimes.
“Quite frankly, they don’t always play their part in remedying the harm they create.
“Should the internet service providers, search engines and social media firms be expected to do more to spot and block suspected scammers from using their services?” he asked, rhetorically.
“The internet giants may argue that it’s too difficult for them to do more, that there are legal complications, or that the internet is too dynamic, changing too rapidly, and that they can’t be obliged to monitor it continually.
“As a minimum, I would expect them to take down suspected fraudulent content immediately when requested to do so by the authorities, and ensure that their terms and conditions give them the right to do so.
“And I would expect them to use their extraordinary resources to work with law enforcement and regulators to develop algorithms and machine learning tools to identify potentially fraudulent content.”
Adverts on social media sometimes look legitimate, which makes it hard for consumers to understand what is real and what is a scam.
But it can also be difficult for retail investors to tell whether an authorised FCA firm is offering them something that is appropriate, especially with the issues of failed mini-bond firm London Capital & Finance.
Randall added: “It’s clear that there’s too much confusion about which financial products are regulated and which aren’t.
“We need to stop FCA authorised firms from advising consumers to buy unsuitable investments.
“We need to ensure that regulation guides [investors] to better savings choices, through policies.”
He also said that “the financial promotions regime is ripe for re-examination”, adding that unless the approval of financial promotions is made a regulated activity, then he is not confident that the regime can provide better protection than it does at present.
The chair of the FCA did not hold back in the speech and said that lessons need to be learned about rushing policies like pension freedoms or pension transfers.
Two areas that have brought about scams.
IA reported on a recent FCA and Pension Regulator survey which found five million Brits are at risk of succumbing to a pension scam.
“We need to discuss whether policymakers do enough to embed thinking about the risk of skimming and scamming into the savings and investment policies they make,” said Randall.
“For example, a number of the victims of skimming and scamming are pension scheme members who have been persuaded to make poor decisions when exercising their new-found freedoms to transfer out of a defined benefit scheme.
“We don’t know exactly how many people have been scammed into transferring their pension pots to fraudsters, or skimmed by bad advice to switch to inappropriate high risk or poor value investments, but it’s clear that it could be a large number
“All policymakers, including the FCA, need to learn lessons for the future from this experience.
“One of which is that a very major change of policy like this needs a substantial period of planning and testing so that all the necessary safeguards against skimming and scamming are integrated before it is launched.”