Exclusive: Does Google’s ad crackdown leave Brits at risk of fraud and mis-selling?
In what Google described as a “significant additional measure” to protect both its users and legitimate advertisers, and to prevent scammers exploiting its various platforms, the multinational tech giant recently announced its intention to clamp down on financial fraud by forcing all financial services advertisers to demonstrate that they are authorised by the Financial Conduct Authority (FCA).
From 30 August, there will be an update to Google Ads financial products and services policy: new certification requirements will be introduced for all financial services advertisers targeting the UK.
Alongside its fellow internet giants, Google has come under increasing pressure to take action over scam advertisements appearing on its platforms.
But according to Mark Kenkre, partner at litigation specialist law firm Keller Lenkner UK, depending entirely on FCA authorisation as a criterion for determining financial advertisers’ credibility and honesty is simply not enough.
“Although this seems like a good start to deal with online financial advertising, it will not solve the problem because many companies which receive FCA authorisation still mis-sell their products and services,” Kenkre told Morning Wire
Capital & Finance scandal
Kenkre singled out the London Capital & Finance (LCF) scandal as an example.
“This highlighted a particularly serious issue whereby firms can gain FCA registration for a limited scope and then use their “FCA regulated” badge to increase their credibility with potential clients and investors,” said Kenkre.
A mini-bond firm, LCF, collapsed in 2019 having raised £237m from 11,000 small investors. In her report on the demise of LCF, Dame Elizabeth Gloster found that the FCA had failed to properly regulate and supervise LCF.
Mel Stride MP, chair of the Treasury Select Committee, further noted: “The collapse of LCF is one of the largest conduct regulatory failures in decades. Dame Elizabeth Gloster identified a litany of failings at the FCA regarding its regulation of LCF, and highlighted a range of changes needed at the FCA under its new leadership.”
Kenkre explained that “many LCF victims have commented on the FCA’s apparent approval of LCF, saying that it gave them confidence to invest. But they were unaware that the FCA permissions held by LCF were not relevant to the activity which they undertook.”
He noted that the FCA register is difficult to search and that consumers cannot easily navigate their way around a firm’s profile in order to work out what that firm is and is not authorised to do. Then there is the question of timing.
“By the time the FCA get onboard and starts to investigate potential wrongdoing, it’s often too late,’ he said. “The companies in question have already headed into default or insolvency.”
Compensation
Receiving compensation via The Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS) is both time consuming, and more critically, limited in the amount of money that be recompensed to investors.
The solution, according to Kenkre, is for a more co-ordinated approach with the FCA engaging with all the various mediums used by fraudsters, including the online community.
“There needs to be much more publicity in order to create greater awareness of the problem, especially within certain demographics,” he concluded.