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Labour plans to make tech giants liable for reimbursing victims of online fraud, report

2024-07-01 09:37:07+01:00

Labour's planned move comes in response to mounting criticism from the financial sector and seeks to address the increasing prevalence of authorised push payment (APP) fraud.

The annual cost of fraud to the UK amounts to billions of pounds. Fraudulent activities are increasingly committed via the internet. Unlike in the past, when fraudsters would use phone, mail or in-person interactions, the internet allows them to victimise people anonymously, from anywhere in the world.

In 2022, MPs called on the government to force tech giants to reimburse people for money lost to fraudulent advertising seen on their platforms.

They argued that current regulations are insufficient and make it easy for criminals to defraud people on social media sites like Facebook and Twitter. No action followed.

However, in a document seen by the Financial Times, Labour criticised big tech companies for shrugging off responsibility for combating online fraud and compensating victims.

The document highlights the issue of authorised push payment (APP) fraud, where individuals are deceived into transferring money to fraudsters.

According to trade association UK Finance, Britons lost £460 million to APP fraud last year, with 70% involving goods that never materialised.

"Britain's banks rightly believe it is both unfair and unsustainable that they should be expected to shoulder so much of the burden of trying to tackle APP fraud and reimburse victims, while the big tech companies on whose platforms this fraud takes place, contribute very little to either effort," the Labour document stated.

"The big tech companies who provide the platforms on which this fraud takes place must take their proper share of the responsibility for tackling APP fraud and reimbursing victims."

Labour's proposal includes provisions for banks to refund fraud victims initially but allows them to later recoup some costs from tech companies. An oversight body would be established to review evidence from banks and payment companies, determining the financial contributions required from tech companies.

Additionally, the plan suggests giving statutory footing to the Online Fraud Charter, a voluntary agreement from 2023 signed by major tech firms such as Amazon, Facebook, Google and Microsoft.

It also proposes expanding the Economic Crime Act to include an offence for tech companies that fail to prevent scams on their platforms.

"We welcome the positive steps to stop these crimes at source and we're ready to play our part. Banks have been at the forefront of tackling this epidemic but they cannot fight it alone," a Lloyds Banking Group spokesperson told The Sunday Times.

Labour's draft proposal marks a shift from the Payment System Regulator's (PSR) decision, which mandates banks to reimburse fraud victims for claims up to £415,000, starting October 2024.

This decision has faced a backlash from banks and the Conservative government, with Tory City minister Bim Afolami expressing concerns over the rules' impact on smaller fintech firms.

Banks have argued that involving the tech sector in covering fraud costs would incentivise them to prevent fraud more effectively.

Trade body UK Finance has criticised the PSR rules for potentially encouraging fraudsters to pose as victims to claim compensation.

The PSR has recently appointed David Geale, the former director of retail banking at the Financial Conduct Authority (FCA), as interim managing director.

Tech giants including Amazon, Meta, Google, Twitter, TikTok and Microsoft have collectively donated $1 million worth of advertising to a national anti-fraud campaign, in efforts to combat online fraud.

In a bid to enhance public awareness and resilience against scams, advertising literacy charity Media Smart is supporting the UK Government's National Campaign Against Fraud with a new scam ad awareness initiative.

This campaign aims to educate 13- to 18-year-olds on identifying potential scams and avoiding them.
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[1] URL: https://www.computing.co.uk/news/4329608/labour-plans-tech-giants-liable-reimbursing-victims-online-fraud-report
[2] URL: https://creativecommons.org/licenses/by-sa/3.0/

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