I beg to move,
That this House
has considered the matter of protecting people from online scams.
It is a pleasure to serve under your chairmanship, Mr Dowd. We all know that access to the internet, whether for shopping, work or leisure, has absolutely been a boon for millions of people, but it has brought its own problems, not least in providing greater opportunities for fraudsters and scammers in an area where there is too little protection or redress for consumers who have been cheated out of their money.
Scams and fraud are the most prevalent types of crime in the UK. According to Action Fraud, 85% of that is what it describes as cyber-enabled—for technophobes like me, that means committed on the internet. The figure of 85% is for the year up to June 2020; it is bound to have grown since then because of the constraints imposed by covid-19, which have encouraged people to spend a lot more time online. The more time they spend online accessing websites and social media platforms, the more susceptible they are to becoming the victim of a scam. That is not because they are stupid or even naive, but because they underestimate how difficult it is to spot the online fakery and fraud and they often overestimate the vetting process undertaken by the established online marketplaces. The frauds are ever more sophisticated. The Association of British Insurers briefing says that even their staff struggle to spot the sites that are fake. If the staff of insurance companies themselves struggle, what hope is there for us as customers?
There are many money scams: investment scams, banking scams, insurance scams, pension scams, conveyancing scams, purchase scams, often involving non-existent products—the Cats Protection League has told me that non-existent cats are being sold online—romance scams, involving fake partners, and even scams targeting those seeking debt help. They all have one thing in common: they dupe people out of money, and it is often big money. Action Fraud shows that the value of losses from reported incidents—many people keep quiet about incidents because they feel stupid, but they are not—is £2.3 billion. Individual amounts are absolutely eye-watering: tens or hundreds of thousands of pounds—someone’s whole life savings gone or the proceeds of a house sale gone.
There are lots of ways in which scammers operate; they use different tricks. These include fake websites or adverts, particularly involving established brands; they sometimes feature fake celebrity endorsements. Fake reviews are a big problem on many of the biggest websites. Which? has consistently shown that. The consumer body has had evidence of fake and suspicious review activity on eBay, Facebook and Tripadvisor. And new research suggests that Amazon is struggling to spot and prevent sellers from using unscrupulous tactics. There is blatant evidence of sellers using free gifts and vouchers to incentivise shoppers to write positive reviews. Many are done in a suspiciously short time, with a suspiciously high number of review images. There was a more than 30% rise in the proportion of suspicious reviews on Amazon between March and August, following the first coronavirus lockdown. Black Friday is coming shortly, and this is particularly worrying for that.
That is important because everyone takes notice of online reviews. I look at the reviews to decide when I buy something. The Competition and Markets Authority estimates that consumer transactions worth £23 billion a year are influenced by online reviews. Many people think, “Well, they’re a good guide—they must be; this has a five-star review.” Amazon says it has clear policies that prohibit sellers from engaging in such activity, but Which? is concerned that the approach is not effective and that firmer action is needed to address the problems. I agree and I hope the Minister will, too.
The losses that people suffer from responding to fake or impersonator adverts are substantial. A Which? investigation highlighted one visitor who lost almost £100,000 after they clicked on an online investment featuring fake celebrity endorsement from Martin Lewis and Deborah Meaden. Another lost £160,000 by clicking on an Aviva ad. Criminals are now using social engineering and grooming techniques that target vulnerable consumers. Sometimes it is a follow-on from an initial contact made from accessing fake sites’ online adverts. The Association of British Insurers has told us about an increasing number of fake websites operating the authorised push payment scams. Some of its members are dealing with 32 fake websites at the same time. An APP scam occurs when somebody is tricked into authorising a transfer of money to an account that they think is a legitimate payee, but is in fact controlled by a scammer. They can be made online, on the phone or in person, and most take place instantly.
UK Finance said that £208 million was lost to APP scams in the first half of 2020. Most fraud took place on personal accounts with £164 million lost, and the non-personal and business loss was £44 million. Some victims have lost their entire life savings. They are often groomed into handing money over by staff at fake call centres. They do not do it instantly; they build a relationship with people now and often use the names of genuine financial services staff.
There have been advances. The contingent reimbursement model code is designed to give people the confidence that if they act appropriately they will be reimbursed, but, even between May 2019 and September 2020, only 40% to 45% of losses were repaid by the victim’s bank or repatriated—the money was recovered and credited—so people are still being left out of pocket. I have to give credit to the TSB, which is going further than the code, and it believes that it has not had more fraudulent claims because it is going further. Fraud is still taking place. Serious amounts of money are being lost. What solutions does the Minister propose for the APP scams?
I have mentioned grooming, and that word is appropriate here. We used to hear about paedophiles grooming. It is about building up trust over time, and that is what happens in many cases of scams.
I thank the hon. Lady for giving me the opportunity to speak on this timely subject. In the past few weeks in my constituency, I have had two cases of online scams brought to me. One gentleman thought he had purchased a car. He paid £9,000 and it was not there when he went to collect it. It was a Northern Ireland to Scotland transaction. Another gentleman has lost £260,000 in three separate investments in what he thought was a legitimate investment site. More needs to be done. We need to educate people and hold the platforms to account. We also need to ensure that the police have the legislative powers to deal with such cases, because in both of those instances, the police would not even investigate them. Through the hon. Lady today, I ask the Minister to really take this matter in hand and start to give the police the legislative powers to tackle the problem.
I totally agree with the hon. Lady. We find that people build up a relationship with their scammers. Trust is key for push payments, as we have heard. I also want to talk quickly about romance scams, in which lonely victims are lured into pretend relationships over many months. They are tempted with fake photographs and back stories, and the scam is revealed only after thousands of pounds have been handed over, probably for non-existent medical treatment for a relation. I have a constituent who handed over thousands of pounds of Amazon vouchers to a fake USA army major. The photograph on his Facebook page had been used more than 50 times with different names to scam people. Surely Facebook should have an algorithm that spots that type of suspicious activity.
It is all too easy to say that people need to be more careful. Yes, they do need to be careful, but scams are ever more sophisticated, and even the most experienced people cannot always spot them. Scammers prey on vulnerable and lonely people, and under covid-19 people are becoming more isolated. They are possibly not able to discuss it with their friends and neighbours and say, “Is this real? Is it not?”.
What is more, people think at the outset that they are protected from this double-dealing. After all, they assume that adverts placed on a well-known platform are legitimate and that the product has been vetted or checked. That is the sort of protection that people are used to on the high street, but online platforms do not have a legal obligation to protect users against scams on their site. Surely that is wrong, given that they are taking revenue from the sellers. Why should the consumer have to shoulder the burden if things go wrong? Does the Minister agree that the burden of responsibly should be on the platforms and sites, which have the data and tools, and not on the consumer, who is at a clear disadvantage in this business?
The voluntary initiatives are not working; they are not sufficient to tackle the online scams. Only 30% of Facebook users are aware of the social media site’s scam advert reporting tool, and only 10% of people have used it. That is really not good enough. I am pleased that the Financial Conduct Authority is producing literature warning customers of possible online scams, but is it not ironic that the regulator is paying for an advert on Google, which is taking similar revenue for the fake adverts on its site? It is a bit of a double-whammy for the search engine—it is getting it twice.
I am obviously not against measures to raise public awareness of scams, and some very good work is being done. The Pension Wise guidance has had a real impact on people’s awareness of pension scams. Many organisations, including regulators, charities and advice agencies, have helpful advice about how to avoid scams, but scammers are extremely agile and good at what they do, and it is not enough to prevent serious fraud.
We need a strong regulatory framework. Online platforms should be given the responsibility for preventing scam content from appearing on their sites and more responsibility for removing it when it is reported. That would perhaps bring them a bit more into line with consumers’ expectations.
The online harms Bill seems the perfect opportunity to deliver that. By including financial harms, there is a greater responsibility on the search engines and social media platforms to identify and remove harmful content. I understand why the White Paper is limited in scope. Platforms and sites will be required to take reasonable steps to identify and prevent user-generated child sexual exploitation and abuse, and terrorist content. However, the tools that the scammers use to target their victims—social engineering and grooming—are similar to those used by criminals in financial fraud. The same requirement should be extended to cover the scam content defrauding people of their money and causing immense mental anguish and harm, let alone financial anguish.
There is also a strong case for ensuring that the Bill covers both paid-for advertising and user-generated content, because the scammers use both. As Which? points out, if we do not tackle the user-generated scam content, scammers will adapt. They will use that loophole and move from posting scam ads to organic user-generated scam content. There is support for that approach from Which?, UK Finance and the FCA.
I hope the Minister will commit to widening the scope of the online harms Bill. If he will not, will he introduce proposals for further legislative action to protect people from online scams effectively? The Government have said that their objective is for the UK to be the safest place in the world to go online. We have a chance now to make that a reality.
May I say what a pleasure it is to serve under your chairmanship, Mr Dowd? I thank Yvonne Fovargue for securing a debate on this important topic. I pay tribute to her general competence and knowledge on consumer issues. I have engaged with her a number of times as a Minister, and I always appreciate the constructive way she approaches this topic. She has demonstrated again this afternoon her comprehensive awareness of the complexity of this subject, and how it impacts so many of our constituents.
I know very well how this issue matters to many colleagues across the House, because it has impacted so many across our constituencies. As a constituency MP, I have encountered the financial and mental impact, and the anguish it causes individuals in my surgery.
I assure Members that the Government are committed to tackling this complex problem. I will set out the context. There have been rapid changes to modern payments, which bring great benefits and opportunities to many, but with new opportunities come new risks, such as the type of scams the hon. Lady set out. More people and businesses are buying and selling online. People are using a range of innovative ways to make payments via card, mobile and electronic wallets. In 2019, over two-thirds of UK adults used online banking, half used mobile banking, and for the first time cards accounted for more than half of UK payments. Those new technologies and products have helped to make payments faster and cheaper, and provided exciting opportunities for UK businesses and consumers.
Alongside those innovations, as the hon. Lady rightly said, criminals are becoming increasingly devious and sophisticated, and are ruthlessly exploiting these new technologies and the digitisation of commerce to perpetrate scams. The truth is that there is no silver bullet. I wish there was. Success in the matter depends on quite sophisticated collaboration between Government, the regulators, banks and online platforms, and between customers and the services they use. The Government are committed to playing their part to facilitate that better collaboration.
Turning to the current situation and what is already being done, authorised push payment scams—APP scams—have become a major problem in recent years. Fraudsters use sophisticated techniques to trick people, often, as the hon. Lady said, by forming phony relationships and defrauding people into authorising payments to criminal-controlled accounts. According to UK Finance, £456 million was lost to these scams in 2019, up from £354 million the year before.
Last week, I met with the managing director of the Payment Systems Regulator and raised concerns like those we have heard today. We agreed that more needs to be done to ensure victims are protected. To that end, the Payment Systems Regulator and industry are working together to improve the level of protection provided to consumers through the existing voluntary code, known as the contingent reimbursement model code, which the hon. Lady referenced.
Banks that have signed up to that code have agreed to reimburse victims of APP scams, so long as they took a reasonable level of care when making the relevant payment. As the hon. Lady will know, the code has been operating since May 2019, and its effectiveness is currently being reviewed by the lending standards board, the body responsible for governing it. I look forward to the conclusions of that review. The hon. Lady cited statistics, which I recognise require thorough examination.
When it comes to fraud, prevention is just as important as any cure. That is why the authorities are taking steps to ensure that fewer people fall foul of the scams in the first place, notwithstanding the sophisticated nature of the interactions that lead to them. At the request of the Payment Systems Regulator, the six biggest UK banking groups have introduced a process known as confirmation of payee. Under that process, the bank account and sort code numbers are checked against account names, to ensure that payments are going to the intended recipients. It is early days, but we are confident that this innovation is an important step forward in preventing scams from succeeding in the first place.
The challenge is that for a number of those measures—we are probably all familiar with them from doing payments ourselves—it comes down to where culpability lies. The hon. Lady made observations about the sophisticated relationship and the conditioning that has sometimes taken place. That is what we are dealing with and what we have to get to grips with.
The financial services sector is just one part of the equation in combatting fraud. Other industries, including online platforms, which have been mentioned, have a role to play. The National Cyber Security Centre has been leading the way in ensuring that online scams are taken down as quickly as possible, and this year it launched a new suspicious email reporting service, making it easier for the public to highlight suspicious emails and websites. The service has already led to more than 3.6 million reports and more than 18,000 scams being removed, but I recognise that more needs to be done.
The Financial Conduct Authority’s ScamSmart website, which is not limited to online scams, also aims to help consumers protect themselves against investment scams. It does that by allowing users to search a warning list to check an investment opportunity and report scams or unauthorised firms. Anybody who falls victim to such scams should contact Action Fraud UK to help us catch the criminals. As Carla Lockhart mentioned in her contribution, this is a universal problem, and I recognise her anxiety about the sufficiency of the measures. As I say, I am happy to continue the discussion about what more can be done.
The private sector has its own responsibility to protect customers online. We have been working with online platforms and industry to take down fraudulent materials and websites. The specialist Dedicated Card and Payment Crime Unit is a great example of that partnership at work: it is a proactive police unit and involves UK Finance, the City of London police, the Metropolitan police and the Home Office. It continues to develop new partnerships with social media companies to take down accounts being used for various fraudulent ends and to stop the recruitment of people as money mules.
As well as working to prevent scams, we need to look after those who fall victim to them. We need to consider the emotional, as well as financial, harm that victims experience. That is why we are working with national and local policing, including police and crime commissioners, to support the victims of these terrible crimes. Even where it is not possible to investigate a case further, the Action Fraud economic crime victim care unit supports victims by helping them to recover and better protect themselves in future. What about the next steps? A lot of good work is being done, but we cannot rest on our laurels. This is a sophisticated problem: just as the wider banking, online and commercial landscapes continue to evolve, so the methods used by criminals to defraud customers evolve. In June 2019, the Treasury announced a review of the payments landscape, and we recently held a call for evidence as the first stage. That call for evidence reflected on the success of the Faster Payments Service as a 24/7 real-time payments system, but it also noted that Faster Payments currently lacks scheme rules to resolve disputes and assign liability when payments go wrong, including—crucially—in the case of APP scams. The Government have concluded that a set of comprehensive rules in the Faster Payments Service could make a real difference to tackling that problem. We have sought views on the issue and will outline our next steps in due course.
Will the Minister also look into the fact that many criminals, particularly in romance-type frauds, have moved on to asking for Amazon vouchers? What can be done in cases such as that of my constituent, who bought thousands of pounds-worth of Amazon vouchers and sent them abroad?
I thank the hon. Lady for her intervention. Although I have not personally experienced that, through either my constituency or ministerial work, she makes a sensible point about the evolving nature of those frauds. In that particular example, it would be reasonable to expect the platform to observe the obvious unusual nature of such a purchase. This is not territory with which I am directly familiar, but I will take it back to my colleagues in Government, including at the Department for Digital, Culture, Media and Sport.
More of us are transacting online than ever before, opting for the speed and convenience of new forms of banking and payments, but sadly fraudsters are taking advantage and developing ever more sophisticated ways of scamming people. We cannot row back on digital innovation and, given the immense benefits, nor should we, but it is crucial that people have confidence in how they transact online.
The Minister mentioned Action Fraud and the police. The problem is that Action Fraud does not seem to have the capacity to deal with the volume. It then passes cases to the London police, who cannot investigate them. Action Fraud needs to be bolstered—it needs support to investigate what is going on beneath the surface.
I am grateful to the hon. Lady. The challenge is that there are multiple streams of activity because of the sophisticated nature of this problem. I certainly understand the risk of confusion about who to go to, but Action Fraud is the first port of call. I accept that there needs to be clarity over what happens subsequently.
Government regulators in a wide range of industries are already taking action to ensure that there is progress. For our part in the Treasury, along with other Whitehall partners, we will continue to actively explore what more can be done. I feel very uncomfortable with this situation not being resolved and I am not complacent in the least about it. I will continue to engage with industry partners on this and I am very grateful—sincerely—to the hon. Member for Makerfield for raising this matter.
Question put and agreed to.