Ofcom must wield new powers to make social media fight fraud – UKTN

Last month saw the long-awaited Online Safety Act come into force in the UK. This much-discussed piece of legislation is intended to create a safer online environment for internet users. In an age where almost everybody has a smartphone, where a significant proportion of business and leisure alike are conducted online and where vulnerable people are routinely targeted for exploitation, this is a commendable ambition. 

Much of the discussion of the new rules has centred on what the Act means for social media companies. The spread of social media in recent decades has irrevocably changed the world, making it easier for friends, families and colleagues to stay connected more closely than ever before. Accompanying this is a new set of risks and dangers which the Act seeks to address. 

Social media giants such as Facebook, X or Instagram now face a potentially enormous fine – of up to 10% of their global revenues – if they fail to implement robust measures against illegal online content. These new measures create welcome and important incentives for these firms to properly combat abusive and extremist material. 

But it is important to note that the obligations imposed by the Act also extend to fraud. It’s been underplayed in the debate, but fraud is the online harm that will directly impact more Britons than any other. It is the most common crime in England and Wales, with the vast majority of incidents originating online. 

As CEO of a fintech business with over two million customers in the UK, I regularly hear the upsetting stories of Pockit and Monese users who have been defrauded out of their hard-earned money, causing huge distress. In accordance with our regulatory obligations, we (and other financial service providers) invest significant resource and money in both combatting fraud and making our customers whole. Yet the social media platforms that facilitate most of these scams have, to date, faced no such obligation.

Now Ofcom, the UK regulator whose responsibilities include the internet and telecoms, has assumed responsibility for overseeing the implementation of the Online Safety Act. And all this comes right at the moment when the government has also announced a reboot of the UK’s wider approach to regulation and regulatory bodies.

The shake-up of the UK’s regulatory establishment has notably involved the dissolution of the Payment Systems Regulator (PSR), the body that had been in charge of overseeing payment firms. The folding of the PSR into the Financial Conduct Authority appears to have been driven in large part by the troubled handling of its approach to Authorised Push Payment (APP) fraud, the most common type of fraud, whereby people are tricked into transferring money to scammers. The fact that the vast majority of APP fraud originates through social media is well established. 

In the PSR’s defence, it was hamstrung by an inability to require social media companies to share in the burden of reimbursing victims of those frauds that originate online. This left banks to pick up the full cost of compensation, in a way likely to impact consumers’ ability to access financial services. 

Now it is up to Ofcom to pick up the baton. It must make use of the powers it has been given to hold social media companies accountable for their role in enabling fraud, and must hold their feet to the fire if we are to see them crack down properly on online scams.

While the thrust of the government’s regulatory strategy is lighter-touch regulation to try to inspire growth, the opposite approach is looking more apposite for dealing with social media giants, who have shown that they can’t be trusted to tackle the issue themselves.

It’s vital that we do so. As well as causing worry and distress to people across the country, fraud holds back growth, costing consumers – and the economy – billions of pounds. 

So while fraud is a huge challenge that takes concerted effort across businesses and the government to fix, we also have a real opportunity for regulators to sharpen their focus on the single most effective thing they can do: make social media companies stop scammers on their platforms, and you’ll soon see fraud plummet. 

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