I am writing to you in response to the publication of the Committee’s report on Protecting pension savers – five years on from the pension freedoms: Pension scams on 28 March 2021. We welcome the Committee’s report and share your aim of reducing the impact of pension scams. I will address in turn the report’s recommendations that concern the Financial Conduct Authority (FCA).
Recording and reporting
We recommend that the Pensions Regulator and the Financial Conduct Authority should use their scams awareness campaign, ScamSmart, to warn of the risk of secondary scammers.
We support this recommendation. The Pensions Regulator (TPR) and the FCA will review data and adjust messaging accordingly about the risk of secondary scammers (also known as recovery fraud) throughout the course of the next financial year and beyond. Messaging will be prioritised by reviewing the reporting data figures from Action Fraud and the FCA and TPR’s contact centres. Further details on FCA’s ScamSmart campaign and TPR’s Pledge campaign can be found in response to recommendation 17 below.
We recommend that inclusion on the FCA warning list should constitute a red flag. If this is not possible, then the red flags developed by DWP should be defined in such a way that any firm or individual appearing on the FCA warning list would trigger a red flag.
We support this recommendation and will work with DWP to consider it. The alerts issued on our warning list do not necessarily relate to scams. They reflect unauthorised conduct which may include scams but will also capture conduct which we judge may pose a risk of harm to consumers but may not necessarily be a scam. It is also worth noting that at the point when an alert is issued, we do not necessarily have evidence to prove fraud even if we suspect this to be the case. The warning list is also constantly evolving, with new alerts being issued, but also previous alerts being updated or adapted. We update the warning list on a daily basis and continue to urge consumers and financial services firms to avoid dealing with firms on the list. We have also developed a Really Simple Syndication (‘RSS’) feed to enable third parties to receive information about our alerts at the point when an alert is issued or updated. In cases where firms are able to demonstrate that they are no longer engaging in unregulated conduct, alerts are sometimes taken down. Given that the list relates to conduct wider than scam activity, and due to the constantly changing content, inclusion on the warning list may be more appropriate as being viewed as an amber rather than red flag.
We recommend that, in order to create parity between traditional media, such as TV and newspapers, and new media, including search engines and social networks, paid-for advertising on online platforms should be covered by the regulatory framework for financial promotions. This would require online publishers to ensure that any financial promotion which they communicate has been approved by an authorised person or is exempted from the financial promotions regime.
As outlined in our Perimeter Report 2019/20, we think it is important that online platform operators bear clear legal liability for the financial promotions they pass on – at least to the same extent as traditional publishers. We therefore agree that online publishers should ensure that any promotion which they communicate has been approved by an authorised person or is otherwise exempt. Since the UK’s departure from the EU an exemption to the financial promotions regime which may have been available to online platforms has fallen away. As a result, we are looking at the operations of the major online platforms to determine whether they are now subject to the financial promotion restriction and, if so, whether they are compliant. We will take action where we consider major platforms are non-compliant.
We recommend that the forthcoming Online Safety Bill should legislate against online investment fraud.
We support this recommendation. We have consistently been of the view that financial harms should be included in the Online Safety Bill to ensure that online platform operators take responsibility for the material which they disseminate which could cause consumers financial harm.
We welcomed the Government’s confirmation that certain types of user-generated online fraud will be brought within scope of the Bill. We very much hope, however, that it can be amended to cover paid-for advertising as well as it is online advertising that is the major source of the problems leading to very significant consumer harms. The outcome we want to see is that platforms have an obligation to identify and remove fraudulent content – regardless of its format.
We do not agree with the arguments made by some platforms that such a measure would undermine competitiveness of the UK technology sector as we do not consider a business model which acts as a gateway to large scale fraud against consumers constitutes a sustainable business model. We recognise that ultimately this is a matter for Government and Parliament to decide on.
In the period between now and any legislation coming into force, we recommend that voluntary codes of conduct should be developed by search engines and social networks which make it clear that a request from a UK-based regulator is sufficient to remove a scam advertisement.
For the reasons set out above, we do not consider that voluntary approaches such as a charter will be sufficient to deal with the significance and urgency of this issue, particularly with respect to online advertising. Nevertheless we support this recommendation, and would encourage online platforms to make public very clearly their commitment to complying with the terms of the Financial Promotions Order (which is now required upon the UK’s exit from the transition period) and the detailed steps they are taking to ensure timely compliance. For example, only allowing ads relating to financial services or products that have been approved by an authorised person or which are otherwise exempt.
We recommend that Pensions Regulator and FCA should continue to run the ScamSmart campaign, while regularly evaluating whether it is reaching the right groups and whether it has the necessary resource to do so effectively.
We support this recommendation. For the past three years, TPR and the FCA have jointly run the high-profile multi-million pound ScamSmart advertising campaign across television, radio, online and digital media, reaching four out of five pension savers between 45–64, the group most at risk from pension scams.
However, as there is no ongoing funding for TPR to continue to support the ScamSmart campaign, it falls to FCA to progress through their own website and social media channels only, with support from Project Bloom, a government-led multi-agency task force, set up to tackle pension fraud. For TPR to continue to support ScamSmart as it has over the past few years, more resource and – more importantly – more funding is needed.
Over the three years of running the consumer facing ScamSmart campaign, TPR has evolved its proposition and shifted its focus to its Pledge to Combat Pension Scams campaign as it centres on TPR’s regulated audience (such as trustees and providers).
Consideration is needed as to whether TPR remains the most appropriate partner to support the ScamSmart campaign, which is consumer-facing.
TPR and FCA will continue to have a close working relationship with Project Bloom partners, including TPR, to support the promotion of both the consumer-facing and industry-facing pension scams campaigns.
We recommend that the FCA publish a costed plan to raise its game in tackling scams. It should also publish proactively data about its enforcement action, rather than waiting for Freedom of Information requests.
The FCA seeks to reduce the incidence of fraud through a framework of prepare, prevent, protect and pursue. We collaborate extensively with other agencies, including as one of the seven core NECC partners. We are carrying out ongoing action, for example, increasing our proactive monitoring of the internet with a dragnet approach aiming to capture suspicious advertising on the same day it first appears. We have proactively published information on our actions to tackle scams in our Investment Harms report and we will continue to publish more data of this kind in future.
We also publish details of all enforcement proceedings we take, including issuing media statements in respect of all criminal prosecutions when commenced and concluded. All of these statements have been and remain publicly available on our website.
Publishing a costed plan would be complicated, as much of our activity as a regulator has an indirect contribution to tackling scams but is nominally attributed to other areas of our activity, such as our financial crime supervision work. In January 2020, we published the Investment Harms report, and we intend to continue to publish this on a regular basis. The FCA also publishes an annual Business Plan which includes detailed information about how the FCA plans to carry out its regulatory functions and exercise its powers over the forthcoming year.
Finally, we also note that such a recommendation would be relevant to a range of regulators and law enforcement agencies with a remit to take action against pension scams and frauds. To the best of our knowledge, no other body with law enforcement responsibilities publishes such a plan.
To avoid the risks of creating yet another regulatory body in an already crowded field, we recommend that the new Pension Scams Centre should have a board made up of representatives of Project Bloom’s current member organisations, with oversight of a pension scams hub. The hub’s responsibilities would include facilitating intelligence sharing within the pensions industry and between regulatory bodies. The funding for both bodies should be ringfenced from existing budgets. The new organisation should consult on a public strategy with clear targets for reducing the incidence of pension scams and publish data demonstrating its success—or otherwise—in achieving these targets.
We support this recommendation. Project Bloom continues to have a significant role to play. However, the establishment of the NECC has placed inter-agency cooperation on a more formal footing than previously, and the NECC has been successful in coordinating law enforcement efforts and action, including among Project Bloom members. The NECC applies significant focus to investment fraud, of which pension scams are a sub-set. However, alongside other Bloom members, we are considering how enhancements might be made to the current model.
I hope that you find this response helpful. If you need anything further on any of the points covered, please do let me know.
Enforcement and Market Oversight