Written evidence submitted by UK Finance (COR0149)

Online harms

1. UK Finance is the collective voice for the banking and finance industry. Representing more than 250 firms, we act to enhance competitiveness, support customers and facilitate innovation.
2. We welcome the opportunity to provide evidence to the Home Affairs Committee’s inquiry into the preparedness of the Home Office for covid-19 on:
• the nature, prevalence and scale of online harms during the covid-19 period;
• steps that could be taken to mitigate these concerns; and
• the adequacy of the UK government’s online-harms proposals to address issues arising from the pandemic, as well as issues previously identified.
3. We strongly recommend that economic crime be brought into the scope of the new online-harms regulatory framework in line with our response to the government’s white paper[1] and the attached briefing document. To summarise:
• Economic crime is a significant threat to the security, prosperity and reputation of the UK.
• The illicit funds gained can enable and fund serious crimes—including terrorism, modern slavery, child sexual exploitation and drug trafficking—that damage our communities, even if the original victim is refunded.
• The criminals responsible exploit some of the most vulnerable in society to scam them out of their money, with a devastating effect on victims.
• The private sector is the first line of defence. The banking and finance sector spends billions of pounds each year to tackle economic crime, but we cannot stop economic crime on our own. We have forged strategic partnerships across the public and private sectors that harness our combined capabilities, resources and experience.
• We are delivering initiatives such at the Banking Protocol,[2] supporting law enforcement with the Dedicated Card and Payment Crime Unit,[3] and helping customers stay safe through the Take Five to Stop Fraud campaign.[4]
• Now we need the cooperation of other industries to tackle the complexity of the task at hand because fraud, bribery and corruption happen across all sectors.
• This includes technology firms preventing their platforms from being used by criminals, service providers ensuring customer data are kept safe, and regulated industries such as legal services and real estate going further to identify money-laundering in their businesses.
• By doing so, we can make the UK the safest and most transparent place in the world to conduct financial business.

Online-harms regulatory framework: ensuring economic crime is in scope

Executive summary

UK Finance strongly recommends economic crime be brought into the scope of the online-harms regulatory framework.

A holistic approach is most effective at keeping customers safe

Tackling online harms requires a holistic approach by which every sector contributing to the problem of economic crime is held to account. Furthermore, it should be recognised that issues already in scope, such as terrorism, are in part enabled by funds derived from economic crime.

The banking and finance sector invests significantly to protect customers from fraud

In 2019, more than £1.8 billion of unauthorised fraud was stopped by advanced security systems and innovations in which the banking and finance sector invested to protect customers. Despite this, criminals still managed to steal £1.2 billion from customers using fraud and scams.

Social-media platforms are exploited by criminals for the purposes of economic crime

The increasing growth of social media and their use as a vehicle for economic crime underscore the importance of introducing an online-harms regulatory framework that protects consumers to the best extent possible. In 2019, worldwide social-media users grew to almost 3.5 billion, with 288 million new users in the past 12 months. In the UK, there are now 45 million social-media users—two thirds of the population. The fight against economic crime must keep pace with technological change.

Economic crime is not an either/or issue as proceeds fund harmful and illegal activities

Economic crime can have a devastating impact on victims, and even if the customer is compensated in full by their finance provider, the criminals that perpetrate these frauds still profit. The criminal proceeds are reinvested to fund harmful and illegal activity such as terrorism, modern slavery, drug trafficking and human trafficking.

Moral, social and financial responsibility for cross-sector efforts to combat crime

The banking and finance sector is not solely responsible for the fight against economic crime, and there is a moral imperative for social-media firms to do more. When an economic crime is committed, there are social and financial costs for both the victims and society. Given increasing economic crime and rising social-media use, the need for cross-sector efforts to combat crime is growing, otherwise there will need to be a significant uplift in law-enforcement resources—as well as in other sectors—to respond to the growing number of frauds. 

The banking and finance sector stands ready to play its part and work with online-platform providers, but bringing economic crime into the scope of the regulatory framework would ensure all sectors undertake efforts to remove vulnerabilities in their systems and organisations, ultimately giving criminals fewer opportunities to target and exploit vulnerable people and the UK economy.

Economic crime and the abuse of social media

The abuse of social-media platforms by organised criminals for the purposes of financial crime has increased significantly, and there is little doubt that this trend will continue to grow. Intelligence from law enforcement and other sources indicates there are thousands of social-media accounts in operation by criminals at any one time, the majority being openly advertised and visible to users. These accounts facilitate advertising for “money mules” (for the purposes of money laundering), selling stolen identity and credit-card data, phishing, bogus investment scams and impersonating legitimate companies such as banks to enable fraud.

• Financial fraud and scams on social media increased fourfold in 2019 to 383,000. 41 per cent of these were identified as fraud-related, 21 per cent money flipping, 18 per cent fundraiser scams and 16 per cent giveaway and coupon scams.[i]
• Over 14,000 phishing links were shared on social-media platforms in 2019.[ii]
• One bank reported that 50 per cent of the scams it saw originated from social media in the previous 12 months.[iii]
• 53 per cent of social-media logins are fraudulent, and 25 per cent of all new account signups are fake.[iv]
• There has been a 188 per cent year-on-year increase in the number of removals of malicious content from social-media posts and imposter accounts.[v]
• 88,000 indications of fraud and scams were identified on various social-media platforms between May 2018 and May 2019. This are data sourced from just one security-monitoring company.[vi]
• The number of children acting as money mules has risen by 73 per cent in two years as criminals target youngsters on social media.[vii] The growing use of social media means there has now been more opportunity for young people to become victims of economic crime. Many are also unaware of the consequences that crime can have for their future opportunities.[viii]
• There has been a sharp rise in those over the age over 40 acting as money mules, with a 25 per cent increase in money-muling activity in those aged 41-50 and a 26 per cent rise in those aged 51-60 over the nine months up to September 2019.[ix]
• Investment scams are becoming increasingly sophisticated, with criminals targeting online investors by impersonating private banks and investment firms on social media. The amount of financial loss because of investment scams in 2019 increased by 90 per cent compared with 2018, from £50.1 million to £95.4 million.[x]

The potential for real benefits by bringing economic crime in scope

The inclusion of economic crime would ensure all online platforms join cross-industry efforts to tackle fraud and money laundering. The benefits are significant. First, economic crimes are intrinsically linked to crimes already identified as within the scope of the online-harms regulatory framework, so enabling more effective tackling of all illegal and harmful-but-legal activity when such a holistic approach is taken. Second, including economic crime would require all online platforms to play their part in cross-sector efforts to protect consumers. Third, the cost of economic crime to the financial sector is substantial, even when the vulnerability originated in another sector. All efforts that contribute to the reduction of economic crime benefit society and reduce online harms.

Economic crime and other illegal activities: you cannot tackle one without the other

• Money laundering is a critical enabler of serious and organised crime, costing the UK an estimated £24 billion a year.[xi]
• Fraud and cybercrime amount to almost a third of all crimes and continue to be among the most commonly experienced in the UK. 3.7 million incidents of fraud were recorded in the year ending December 2019.[xii]
• The overall scale of economic crime is estimated to be £7.3 billion per year. The cost to businesses and the public sector from organised fraud is £5.9 billion per year.[xiii]

Unquestionably, there is a clear link between economic crime and the funding of illegal activity, with online platforms being increasingly exploited by criminals.

The UK government’s Serious Organised Crime Strategy 2018 recognised that the “increasingly pervasive nature of technologies will allow less skilled and resourced criminals to gain access to markets and tools that were previously out of their reach,”[xiv] and the National Crime Agency assessed that “the threat from serious and organised crime is increasing and serious and organised criminals are continually looking for ways to sexually or otherwise exploit new victims and novel methods to make money, particularly online.”[xv]

May 2020