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A group of UK parliamentarians have called on the government to extend the powers of the Payment Systems Regulator and act faster on fraudsters and scammers.
In its Economic Crime report, the influential Treasury Select Committee has called for additional government action to combat fraud and scammers.
The report is hefty in size, and covers various issues that the UK has become all too familiar with in recent years such as fraud, how to regulate crypto and how to tackle dirty money that is able to flow through the City.
“This report makes it clear that the government still has a lot of work to do to tackle the extent of economic crime in the UK but also that it is a complex issue and there are no easy solutions,” Kathryn Westmore, senior fellow at the Centre for Financial Crime and Security Studies, told VIXIO.
It raises some crucial points, agreed Jonathan Jensen, regulatory advisor at software company GBG. “Economic crime is a threat that affects every individual whether directly when they fall victim to fraudsters or indirectly via higher taxes and prices.”
There is now optimism that the issues at stake in the report will be addressed by the government.
“I think that the government will take heed in this warning from the committee. They have now committed to bringing the Economic Crime Bill review forward, after it had looked like it was going to be kicked into the long grass,” said Arun Chauhan, trustee director at the Fraud Advisory Panel.
Chauhan, who is also a solicitor with Tenet Law, said that he thinks this will be a useful and tough piece of legislation that will improve money laundering supervision, as well as transparency regarding company ownership.
Yet, the government’s current bandwidth may be tested.
“What the Treasury Select Committee has suggested is seismic. This is coming at the same time as tax hikes and concerns about the cost of living,” he pointed out. “I suspect that The Treasury will struggle to find the money to sufficiently bolster their anti-fraud resources to meet the committee’s recommendations."
Fraud, fraud, fraud
The UK’s shortcomings in tackling what has become a crimewave of fraud dominates the report.
“When it comes to fraud, there is a lot of focus on the role of online platforms and social media. The technology companies absolutely have a role to play and can clearly do more to protect us from fraud,” said Westmore.
But the government also needs to take a long-term strategic view of the fraud threats to the UK, she said. “Otherwise, there is a risk that we will solve one problem and enterprising fraudsters will simply turn to another channel and exploit that.”
The report says that the government should consider whether online platforms and social media companies should be required to do know your customer (KYC) checks on their advertisers, to make it more difficult for fraudsters to promote themselves.
Moreover, it recommends that the government “seriously consider” whether online companies should be required to contribute compensation when fraud is conducted using their platforms.
Repeating a call made by the previous Treasury Committee in 2019 regarding authorised push payment fraud, the cross-party committee of MPs also unanimously recommended “that the government urgently legislates to give the Payment Systems Regulator (PSR) powers to make reimbursement mandatory, and that the PSR then take rapid action to protect consumers”.
The report pressed for the PSR and Treasury to accelerate their consultation processes to enable quicker implementation of measures to protect consumers from fraud.
According to the MPs, the pace of change has been very slow against a background of growing fraud, which should have prompted greater urgency.
For example, consumer interest group Which? filed a super-complaint in 2016, and the previous Treasury Committee called for the Contingent Reimbursement Model (CRM) Code to be made mandatory in 2019.
“Since then, nearly three years have passed, during which time authorised push payment fraud has increased, causing significant harm,” the report says, criticising the PSR for the fact that although there is now a clear intention to make reimbursement mandatory, another year has been lost.
The committee also called upon the PSR to submit a report on progress regarding Phase 2 of the Confirmation of Payee (CoP) rollout by the end of 2022.
The report also says that improving data-sharing between banks is one of the measures which the PSR is implementing as part of its reform of the CRM Code, but warns more may need to be done. “The Treasury should be ready to bring forward any legislation which is needed to enable this, and the PSR should ensure that banks act quickly in putting in place the necessary changes.”
Crypto
The cross-party group of MPs also suggested that more work should be done regarding crypto-assets.
In the report, they said that they shared the government’s concern about the risk to consumers from the growth in the crypto market. “We welcome the announcement by the Treasury that the government will legislate to bring advertising of crypto-assets into line with that of other financial services and products, and that the FCA is strengthening financial promotion rules, including those for crypto-assets.”
However, there is more to be done, according to the committee, especially regarding anti-money laundering compliance, considering that the UK implemented the 5th Anti-Money Laundering Directive requirements for crypto prior to its EU departure.
For example, the government should set out in the Economic Crime Plan its intention that all crypto-asset firms should be registered for anti-money laundering (AML) purposes.
“This has not yet been achieved. It is unacceptable that, having introduced AML regulations for crypto-asset firms in 2020, there are so many firms which have not yet been registered,” the Treasury said. “Large numbers have not even applied for registration, and it is not clear what sanction they face.”
Although the lawmakers acknowledged the need for a rigorous process, registration has been too slow. “It needs to be speeded up, and the government should work with the FCA to find a solution. The FCA should not extend the deadline for registration again beyond March 2022,” the report says, demanding that if the Financial Conduct Authority (FCA) sees no alternative, it should write to the committee to explain its position.
CryptoUK, the UK’s crypto trade association, told VIXIO that it welcomed the report's efforts to enhance crypto consumer protection in the UK. “We have been working closely with many groups supporting the focus on consumer protection across the whole financial sector to provide resources and education on how best to protect consumers in relation to crypto scams.”
To achieve this, the UK needs a holistic, balanced regulatory framework, a spokesperson for the association said. “We believe that there is real momentum building within parliament on addressing these issues in a balanced and measured way.”
Meanwhile, Lisa Cameron, who chairs the parliamentary interest group on crypto-assets, said: “There can be no place for bad actors in the UK crypto-asset sector. We want to see a thriving, well regulated industry that enables the highest standards of consumer protection, and confidence for consumers that they are dealing with regulated firms.”
Discussing the FCA registration scheme, the Scottish National Party MP said that she would like to see the banking watchdog accelerate this as a priority to provide regulatory clarity to both consumers and businesses as well.
