Ministers must force tech giants such as Google, Facebook and Microsoft to stop the “immoral” practice of profiting from the £10bn of pension fraud committed by internet scammers, a committee of MPs has urged.
Fraudsters use online advertisements, mostly on Google, to trick people out of their pension funds, according to a report published by the work and pensions select committee, but regulators are “powerless” to hold the internet firms to account.
After accepting payment for the ads from criminals, the tech firms then make more money by hosting public warnings about the scams from regulators such as the Financial Conduct Authority, the MPs’ report said.
“It should not require legislative solutions to deter global firms from benefiting from the proceeds of crime, but unfortunately legislation is clearly needed,” the report says.
Although the government is proposing to introduce an online harms bill to parliament later this year, this will focus on child sexual abuse and terrorism, without any mention of the epidemic of internet fraud.
During its inquiry, the committee heard evidence from the Pension Scams Industry Group that 40,000 people had been defrauded of £10bn since 2015, with online fraud in general costing £190bn a year.
The MPs say internet firms should be covered by legislation that already forces newspapers and broadcasters to vet financial adverts or face legal liability. Stephen Timms, the committee chairman, told the Observer: “These companies should not be taking the crooks’ money and putting up on their platforms the material they provide, then also taking the regulators’ money to warn people about the crooks.”
The FCA would, he said, ask Google and others to remove scam ads, but no action would be taken for weeks.
“There does need to be a duty of care in this area, as in child pornography and the other things that are intended to be in the scope of this bill,” Timms went on. “The government’s intention appears to be to exclude financial harms from this bill. I do think it’s really important that this opportunity should be taken.”
Fraud accounts for a third of reported crime but less than 1% of police resources are spent on investigating it, Graeme Biggar, the director general of the National Economic Crime Centre, told the committee. Enforcement is splintered between the police and seven regulators.
Action Fraud, the national call centre run by City of London police, has been trying to rebuild its reputation since the Times revealed in 2019 that most cases were never investigated and staff had mocked victims as “morons”.
Pension scams: some victims have lost more than £1m to fraudstersRead more
The FCA was also criticised during the inquiry for failing to stop scams or retrieving the proceeds of crime, and for achieving only 25 convictions. The MPs called for a dedicated Pension scams centre to manage an intelligence database and enforce the law.
Younger fraud victims often suffer a double whammy of losing their pension funds, then facing large tax bills on the money they have lost, the report says. People who access their pension fund before the age of 55 have to pay charges that can amount to half the value of the fund. Scammers often persuade people there are loopholes, the MPs say, but this is false and HMRC is “unrelenting and uncompromising” when it pursues scam victims for the tax owed.
As a result, some victims never report the crime for fear of tax penalties, the report says. The MPs called on HMRC to “show some discretion” and said the law should be changed so tax is taken at source.
There was also evidence of “secondary scammers” – fraudsters who stole people’s pensions then targeted their victims again by posing as claims management companies. The bogus firms would cold call victims, offering to help bring a claim against their insurance adviser, ask for a fee up front, then disappear.
