Baroness Morgan of Cotes:

Moved by Baroness Morgan of Cotes

53: Clause 16, page 18, line 10, at end insert—“(3A) Content that constitutes a fraudulent advertisement within the meaning of section 33.”Member’s explanatory statementThis amendment, and others in the name of Baroness Morgan, would extend the current provisions on transparency reporting, user reporting and user complaints to fraudulent advertisements.

My Lords, I shall speak to Amendments 53 to 55, and Amendments 86, 87, 162 to 173, and 175 to 181 in my name and that of the noble Lord, Lord Clement-Jones. I declare my relevant interests in this group of amendments as a non-executive director of the Financial Services Compensation Scheme and Santander UK, and chair of the Association of British Insurers—although, as we have heard, fraud is prevalent across all sectors, so we are all interested in these issues.

This debate follows on well from that on the last group of amendments, as we were just hearing. Fraud is now being discussed so widely in this House and in Parliament that there are three Bills before your Lordships’ House at the moment in which fraud is a very real issue. I am sure that there are others, but there are three major Bills—this one, the Economic Crime and Corporate Transparency Bill, and the Financial Services and Markets Bill.

These amendments seek to fill a noticeable gap in the Bill concerning fraudulent advertisements—a gap that can be easily remedied. The Minister has done a very good job so far with all groups that we have debated, batting away amendments, but I hope that he might just say, “Yes, I see the point of the amendment that you are putting forward, and I shall go away and think about it”. I will see what attitude and response we get at the end of the debate.

I had the great privilege, as I said yesterday when asking a question, of chairing this House’s 2022 inquiry into the Fraud Act 2006 and digital fraud. As we have heard, fraud is currently the fastest growing crime and is being facilitated by online platforms. Coincidentally, just today, UK Finance, the trade body for the UK banking industry, has published its fraud figures for 2022. It has conducted analysis on more than 59,000 authorised push payment fraud cases to show the sources of fraud. Authorised push payment is where the customer—the victim, unfortunately—transfers money to the fraudster and authorises that transfer but has often, or usually, been socially engineered into doing so. UK Finance is now asking where those frauds originate from, and its analysis shows that 78% of APP fraud cases originated online and accounted for 36% of losses, and 18% of fraud cases originated via telecommunications and accounted for 44% of losses.

I will leave to one side the fact that the Bill does not touch on emails and telecoms, and I shall focus today on fraudulent advertisements and fraud. I should say that I welcome the fact the Government changed the legislation from the draft Bill when the Bill was presented to the House of Commons so that fraudulent advertisements and fraud were caught more in the Bill than had originally been anticipated.

As we have heard, victims of fraud suffer not just financially but emotionally and mentally, with bouts of anxiety and depression. They report feeling “embarrassed or depressed” about being scammed. Many lose a significant amount of money in a way that severely impacts their lives and, in the worst cases, people have been known to take their own lives. In case of things such as romance scams or investment scams, people’s trust is severely undermined in any communication that they subsequently receive. I thank all of those victims of fraud who gave evidence to our inquiry and have done so to other inquiries in this House and in the House of Commons.

Fraud is a pretty broad term, as we set out in the report, and we should be clear that this Bill covers fraud facilitated by user-generated content or via search results and fraudulent advertisements on the largest social media and search services. My noble friend the Minister spoke about the meeting held earlier this week between Members of this House and Ministers, and officials produced a helpful briefing note that makes it clear that the Bill covers such fraud. However, as I said, emails, SMS and MMS messages, and internet service providers—web hosting services—are not covered by the Bill. There remains very much a gap that victims, sadly, can fall through.

The point of the amendments in the group, and the reason I hope that the Minister can at least say yes to some of them, is that they are pushing in the direction that the Government want to go too. At the moment, the Bill appears to exclude fraudulent advertisements from several key duties that apply to other priority illegal content, thereby leaving consumers with less protection. In particular, the duties or lack of them around transparency reporting, user reporting and complaints in relation to fraudulent advertisements is concerning. It does not make any sense. That is why I hope that the Minister can explain the drafting. It could be argued that fraudulent advertising is already included in transparency reporting as defined in the Bill, but that is limited to a description of platforms’ actions and does not include obligations to provide information on the incidence of fraudulent advertisements or other key details, as is required for other types of illegal content.

Transparency reporting, as I suspect we will hear from a number of noble Lords, is essential for the regulator to see how prevalent fraudulent advertisements are on a platform’s service and whether that platform is successfully mitigating the advertisements. It remains essential, too, that users can easily report fraudulent content when they come across it and for there to be a procedure that allows users to complain if platforms are failing in their duty to keep users safe.

I should point my noble friend to the Government’s fraud strategy published last week. Paragraph 86 states:

“We want to make it as simple as possible for users to report fraud they see online. This includes scam adverts, false celebrity endorsements and fake user profiles. In discussion with government, many of the largest tech companies have committed to making this process as seamless and consistent as possible. This means, regardless of what social media platform or internet site you are on, you should be able to find the ‘report’ button within a single click, and then able to select ‘report fraud or scams’.”

The Government are saying that they want user reporting to be as simple as possible. These amendments suggest ways in which we can make user reporting as simple as possible as regards fraudulent advertisers.

The amendments address the gap in the Bill’s current drafting by inserting fraudulent advertising alongside other illegal content duties for social media reporting in Clause 16, complaints in Clause 17 and the equivalent clauses for search engines in Clauses 26 and 27. The amendments add fraudulent advertising alongside other illegal content into the description of the transparency reporting requirements in Schedule 8. Without these amendments, the regulator will struggle to understand the extent of the problem of fraudulent advertisements and platforms will probably fail to prevent this harmful content being posted.

This will, I hope, be a short debate, and I look forward to hearing what my noble friend the Minister has to say on this point. I beg to move.

My Lords, I also have a pair of amendments in this group. I am patron of a charity called JobsAware, which specialises in dealing with fraudulent job advertisements. It is an excellent example of collaboration between government and industry in dealing with a problem such as this. Going forward, though, they will be much more effective if there is a decent flow of information and if this Bill provides the mechanism for that. I would be very grateful if my noble friend would agree to a meeting, between Committee and Report, to discuss how that might best be achieved within the construct of this Bill.

It is not just the authorities who are able to deter these sort of things from happening. If there is knowledge spread through reputable networks about who is doing these things, it becomes much easier for other people to stop them happening. At the moment, the experience in using the internet must bear some similarity to walking down a Victorian street in London with your purse open. It really is all our responsibility to try to do something about this, since we now live so much of our life online. I very much look forward to my noble friend’s response.

My Lords, I had the great privilege of serving as a member of this House’s Fraud Act 2006 and Digital Fraud Committee under the excellent chairing of the noble Baroness, Lady Morgan. She has already told us of the ghastly effects that fraud has on individuals and indeed its adverse effects on businesses. We heard really dramatic statistics, such as when Action Fraud told us that 80% of fraud is cyber enabled.

Many of us here will have been victims of fraud—I have been a victim—or know people who have been victims of fraud. I was therefore very pleased when the Government introduced the fraudulent advertising provisions into the Bill, which will go some way to reducing the prevalence of online fraud. It seems to me that it requires special attention, which is what these amendments should do.

We heard in our inquiry about the problems that category 1 companies had in taking down fraudulent advertisements quickly. Philip Milton, the public policy manager at Meta, told us that it takes between 24 and 48 hours to review possibly harmful content after it has been flagged to the company. He recognised that, due to the deceptive nature of fraudulent advertising, Meta’s systems do not always recognise that advertising is fraudulent and, therefore, take-down rates would be variable. That is one of the most sophisticated tech platforms—if it has difficulties, just imagine the difficulty that other companies have in both recognising and taking down fraudulent advertising.

Again and again, the Bill recognises the difficulties that platforms have in systematising the protections provided in the Bill. Fraud has an ever-changing nature and is massively increasing—particularly so for fraudulent advertising. It is absolutely essential that the highest possible levels of transparency are placed upon the tech companies to report their response to fraudulent advertising. Both Ofcom and users need to be assured that not only do the companies have the most effective reporting systems but, just as importantly, they have the most effective transparency to check how well they are performing.

To do this, the obligations on platforms must go beyond the transparency reporting requirements in the Bill. These amendments would ensure that they include obligations to provide information on incidence of fraud advertising, in line with other types of priority illegal content. These increased obligations are part of checking the effectiveness of the Bill when it comes to being implemented.

The noble Baroness, Lady Stowell, told us on the fifth day of Committee, when taking about the risk-assessment amendments she had tabled:

“They are about ensuring transparency to give all users confidence”.—[Official Report, 9/5/23; col. 1755.]

Across the Bill, noble Lords have repeatedly stated that there needs to be a range of ways to judge how effectively the protections provided are working. I suggest to noble Lords that these amendments are important attempts to help make the Bill more accountable and provide the data to future-proof the harms it is trying to deal with. As we said in the committee report:

“Without sufficient futureproofing, technology will most likely continue to create new opportunities for fraudsters to target victims”.

I ask the Minister to at least look at some of these amendments favourably.

My Lords, I shall say very briefly in support of these amendments that in 2017, the 5Rights Foundation, of which I am the chair, published the Digital Childhood report, which in a way was the thing that put the organisation on the map. The report looked at the evolving capacity of children through childhood, what technology they were using, what happened to them and what the impact was. We are about to release the report again, in an updated version, and one of the things that is most striking is the introduction of fraud into children’s lives. At the point at which they are evolving into autonomous people, when they want to buy presents for their friends and parents on their own, they are experiencing what the noble Baroness, Lady Morgan, expressed as embarrassment, loss of trust and a sense of deserting confidence—I think that is probably the phrase. So I just want to put on the record that this is a problem for children also.

My Lords, this has been an interesting short debate and the noble Baroness, Lady Morgan, made a very simple proposition. I am very grateful to her for introducing this so clearly and comprehensively. Of course, it is all about the way that platforms will identify illegal, fraudulent advertising and attempt to align it with other user-to-user content in terms of transparency, reporting, user reporting and user complaints. It is a very straightforward proposition.

First of all, however, we should thank the Government for acceding to what the Joint Committee suggested, which was that fraudulent advertising should be brought within the scope of the Bill. But, as ever, we want more. That is what it is all about and it is a very straightforward proposition which I very much hope the Minister will accede to.

We have heard from around the Committee about the growing problem and I will be very interested to read the report that the noble Baroness, Lady Kidron, was talking about, in terms of the introduction of fraud into children’s lives—that is really important. The noble Baroness, Lady Morgan, mentioned some of the statistics from Clean Up the Internet, Action Fraud and so on, as did the noble Viscount, Lord Colville. And, of course, it is now digital. Some 80% of fraud, as he said, is cyber-enabled, and 23% of all reported frauds are initiated on social media—so this is bang in the area of the Bill.

It has been very interesting to see how some of the trade organisations, the ABI and others, have talked about the impact of fraud, including digital fraud. The ABI said:

“Consumers’ confidence is being eroded by the ongoing proliferation of online financial scams, including those predicated on impersonation of financial service providers and facilitated through online advertising. Both the insurance and long-term savings sectors are impacted by financial scams perpetrated via online paid-for advertisements, which can deprive vulnerable consumers of their life savings and leave deep emotional scars”.

So, this is very much a cross-industry concern and very visible to the insurance industry and no doubt to other sectors as well.

I congratulate the noble Baroness, Lady Morgan, on her chairing of the fraud committee and on the way it came to its conclusions and scrutinised the Bill. Paragraphs 559, 560 and 561 all set out where the Bill needs to be aligned to the other content that it covers. As she described, there are two areas where the Bill can be improved. If they are not cured, they will substantially undermine its ability to tackle online fraud effectively.

This has the backing of Which? As the Minister will notice, it is very much a cross-industry and consumer body set of amendments, supporting transparency reporting and making sure that those platforms with more fraudulent advertising make proportionately larger changes to their systems. That is why there is transparency reporting for all illegal harms that platforms are obliged to prevent. There is no reason why advertising should be exempt. On user reporting and complaints, it is currently unclear whether this applies only to illegal user-generated content and unpaid search content or if it also applies to illegal fraudulent advertisements. At the very least, I hope the Minister will clarify that today.

Elsewhere, the Bill requires platforms to allow users to complain if the platform fails to comply with its duties to protect users from illegal content and with regard to the content-reporting process. I very much hope the Minister will accede to including that as well.

Some very simple requests are being made in this group. I very much hope that the Minister will take them on board.

It is the simple requests that always seem to evade the easy solutions. I will not go back over the very good introductory speech from the noble Baroness, which said it all; the figures are appalling and the range of fraud-inspired criminality is extraordinary. It plays back to a point we have been hammering today: if this Bill is about anything, it is the way the internet amplifies that which would be unpleasant anyway but will now reach epidemic proportions.

I wonder whether that is the clue to the problem the noble Baroness was commenting on—I think more in hope than in having any way to resolve it. It is great news that three Bills are doing all the stuff we want. We have talked a bit about three-legged stools; this is another one that might crash over. If we are not careful, it will slip through the cracks. I am mixing my metaphors again.

If the Minister would not mind a bit of advice, it seems to me that this Bill could do certain things and do them well. It should not hold back and wait for the others to catch up or do things differently. The noble Baroness made the point about the extraordinarily difficult to understand gap, in that what is happening to priority illegal content elsewhere in the Bill does not apply to this, even though it is clearly illegal activity. I understand that there is a logical line that it is not quite the same thing—that the Bill is primarily about certain restricted types of activity on social media and not the generality of fraud—but surely the scale of the problem and our difficulty in cracking down on it, by whatever routes and whatever size of stool we choose, suggest that we should do what we can in this Bill and do it hard, deeply and properly.

Secondly, we have amendments later in Committee on the role of the regulators and the possibility recommended by the Communications and Digital Committee that we should seek statutory backing for regulation in this area. Here is a classic example of more than two regulators working to achieve the same end that will probably bump into each other on the way. There is no doubt that the FCA has primary responsibility in this area, but the reality is that the damage is being done by the amplification effect within the social media companies.

It may or may not be correct, in terms of what we are doing, to restrict what the Bill does to those aspects of user-to-user content and other areas. If something is illegal, surely the Bill should be quite clear that it should not be happening and Ofcom should have the necessary powers, however we frame them, to make sure we follow this through to the logical conclusion. The most-needed powers are the ability for Ofcom to take the lead, if required, in relation to the other regulators who have an impact on this world—can we be sure that is in the Bill and can be exercised?—and to make sure that the transparency, the user reporting and the complaints issues that are so vital to cracking this in the medium term get sorted. I leave that with the Minister to take forward.

I am grateful to my noble friends for their amendments in this group, and for the useful debate that we have had. I am grateful also to my noble friend Lady Morgan of Cotes and the members of her committee who have looked at fraud, and for the work of the Joint Committee which scrutinised the Bill, in earlier form, for its recommendations on strengthening the way it tackles fraud online. As the noble Lord, Lord Clement-Jones, said, following those recommendations, the Government have brought in new measures to strengthen the Bill’s provisions to tackle fraudulent activity on in-scope services. I am glad he was somewhat satisfied by that.

All in-scope services will be required to take proactive action to tackle fraud facilitated through user-generated content. In addition, the largest and most popular platforms have a stand-alone duty to prevent fraudulent paid-for advertising appearing on their services. This represents a major step forward in ensuring that internet users are protected from scams, which have serious financial and psychological impacts, as noble Lords noted in our debate. Fully addressing the challenges of paid-for advertising is a wider task than is possible through the Bill alone. Advertising involves a broad range of actors not covered by the current legislative framework, such as advertising intermediaries. I am sympathetic to these concerns and the Government are taking action in this area. Through the online advertising programme, we will deliver a holistic review of the regulatory framework in relation to online advertising. The Government consulted on this work last year and aim to publish a response erelong. As the noble Lord, Lord Stevenson, and others noted, there are a number of Bills which look at this work. Earlier this week, there was a meeting hosted by my noble friends Lord Camrose, Lord Sharpe of Epsom and Lady Penn to try to avoid the cracks opening up between the Bills. I am grateful to my noble friend Lady Morgan for attending; I hope it was a useful discussion.

I turn to the amendments tabled by my noble friend. The existing duties on user reporting and user complaints have been designed for user-generated content and search content and are not easily applicable to paid-for advertising. The duties on reporting and complaints mechanisms require platforms to take action in relation to individual complaints, but many in-scope services do not have control over the paid-for advertising on their services. These amendments are therefore difficult to operate for many in-scope services and would create a substantial burden for small businesses. I assure her and other noble Lords that the larger services, which have strong levers over paid-for advertising, will have to ensure that they have processes in place to enable users to report fraudulent advertising.

In reference to transparency reporting, let me assure my noble friend and others that Ofcom can already require information about how companies comply with their fraudulent advertising duties through transparency reports. In addition, Ofcom will also have the power to gather any information it requires for the purpose of exercising its online safety functions. These powers are extensive and will allow Ofcom to assess compliance with the fraudulent advertising duties.

The noble Viscount, Lord Colville of Culross, asked about the difficulty of identifying fraudulent advertising. Clauses 170 and 171 give guidance and a duty on Ofcom about providers making a judgment about content, including fraudulent advertising. There will also be a code of practice on fraudulent advertising to provide further guidance on mechanisms to deal with this important issue.

My noble friend Lord Lucas’s Amendments 94 and 95 aim to require services to report information relating to fraudulent advertising to UK authorities. I am confident that the Bill’s duties will reduce the prevalence of online fraud, reducing the need for post hoc reporting in this way. If fraud does appear online, there are adequate systems in place for internet users to report this to the police.

People can report a scam to Action Fraud, the national reporting service for fraud and cybercrime. Reports submitted to Action Fraud are considered by the National Fraud Intelligence Bureau and can assist a police investigation. Additionally, the Advertising Standards Authority has a reporting service for reporting online scam adverts, and those reports are automatically shared with the National Cyber Security Centre.

The online advertising programme, which I mentioned earlier, builds on the Bill’s fraudulent advertising duty and looks at the wider online advertising system. That programme is considering measures to increase accountability and transparency across the supply chain, including proposals for all parties to enhance record keeping and information sharing.

My noble friend Lord Lucas was keen to meet to speak further. I will pass that request to my noble friend Lord Sharpe of Epsom, who I think would be the better person to talk to in relation to this on behalf of the Home Office—but I am sure that one of us will be very happy to talk with him.

I look forward to discussing this issue in more detail with my noble friend Lady Morgan and others between now and Report, but I hope that this provides sufficient reassurance on the work that the Government are doing in this Bill and in other ways. I invite my noble friends not to press their amendments.

My Lords, I am grateful to my noble friend for replying to my amendments and for his offer of a meeting, which I will certainly accept when issued.

The Government are missing some opportunities here. I do not know whether he has tried reporting something to Action Fraud, but if you have not lost money you cannot do it; you need to have been gulled and lost money for any of the government systems to take you seriously. While you can report something to the other ones, they do not tell you what they have done. There is no feedback or mechanism for encouraging and rewarding you for reporting—it is a deficient system.

When it comes to job adverts, by and large they go through job boards. There is a collection of people out there who are not direct internet providers who have leverage, and a flow of data to them can make a huge difference; there may also be other areas. It is that flow of data that enables job scams to be piled down on, and that is what the Bill needs to improve. Although the industry as a whole is willing, there just is not the impetus at the moment to make prevention nearly as good as it should be.

My Lords, I thank my noble friend the Minister very much indeed for his response. Although this has been a short debate, it is a good example of us all just trying to get the Bill to work as well as possible—in this case to protect consumers, but there will be other examples as well.

My noble friend said that the larger services in particular are the ones that are going to have to deal with fraudulent advertisements, so I think the issue about the burdens of user reporting do not apply. I remind him of the paragraph I read out from the Fraud Strategy, where the Government themselves say that they want to make the reporting of fraud online as easy as possible. I will read the record of what he said very carefully, but it might be helpful after that to have a further conversation or perhaps for him to write to reassure those outside this Committee who are looking for confirmation about how transparency reporting, user reporting and complaints will actually apply in relation to fraudulent advertisements, so that this can work as well as possible.

On that basis, I will withdraw my amendment for today, but I think we would all be grateful for further discussion and clarification so that this part of the Bill works as well as possible to protect people from any kind of fraudulent advertisement.

Amendment 53 withdrawn.

Clause 16 agreed.

Clause 17: Duties about complaints procedures

Amendments 53A to 55 not moved.

Clause 17 agreed.

House resumed.

House adjourned at 6.56 pm.