Regulators and police lambasted for failing to reduce scams threat
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Pensions experts and consumer organisations have told MPs the Financial Conduct Authority and other enforcement agencies have been ineffective at reducing the scams threat, demanding better laws and supervision to protect savers.
The full extent of pension and investment scams is unknown, but the Pensions Regulator says people who fall victim lose an average £82,000 worth of pensions money.
Thames Valley police crime commissioner Anthony Stansfeld has previously said that fraud on the whole is now costing the UK economy as much as the entire NHS, £193bn based on figures from 2016, yet less than 0.05% of this amount is spent on countering it. “No wonder it is the crime of choice for the more intelligent criminal,” he noted.
At an evidence session on Wednesday before the Work and Pensions Committee, which has launched an inquiry into the pension freedoms, anti-scam campaigners, advisers and consumer protection organisations fiercely criticised the lack of supervision and regulatory action from the FCA and Action Fraud among others, and a lack of effective collaboration between agencies.
Andy Agathangelou, founder of the Transparency Task Force, said his group’s nickname for Action Fraud was ‘Inaction Fraud’.
Asked about the absence of prosecutions on scams by the FCA between 2013 and 2019, he said that this “suggests there is a lack of effective enforcement activity”.
The FCA published a discussion paper in 2018 on an overarching and enforceable framework built around a duty of care, he said, but “unfortunately it would appear to have been kicked into the long grass; some people suggest because the industry has pushed back against that”. Agathangelou would like to see this idea resurrected, arguing that a flexible and agile regime able to deal with scams needs to be based on principles.
He also proposed the creation of a taskforce to take over from Project Bloom, the scams collaboration by regulators and other agencies, to centralise power and increase transparency. This could close the current gaps in the regulatory framework, he suggested, adding that “crooks know to dance just outside and around the regulatory perimeter”.
Advisers feel the FCA does not understand their business
Tim Fassam director of government relations & policy at The Personal Investment Management and Financial Advice Association, also blamed the FCA for the ease with which scammers can currently operate.
Increases in scam levels are being observed in areas that are “technically within the scope of regulations” but lead to poor consumer outcomes, such as SIPPS with high risk unregulated investments, he said, and is “caused by FCA focusing on larger firms, missing some smaller ones, and also the FCA perimeter excluding too many products”.
Supervision by the FCA is “not strong enough", according to Fassam. “Many of our members interact with it through a call centre. They feel [the FCA] do not understand their business. It makes them concerned because if they feel they’re not being supervised effectively, that means the bad guys are not supervised effectively,” he added.
The FCA published a call for input on Tuesday on how to improve the consumer investment market which included a question on the best ways to reduce scams.
Jointly with the Pensions Regulator it is also continuing to run a 'ScamSmart' campaign to raise awareness among savers.
Fassam suggested including financial harm in the proposed Online Harms bill. Lawmakers “have explicitly excluded financial harm, we believe that’s the wrong decision”, he said.
This view was shared by Richard Piggin, head of external affairs and campaigns at consumer group Which? “The government is looking at online harm legislation and unbelievably, online scams aren’t part of it,” he said, adding that it was “critical” that scams are within the scope of this legislation.
The role of search engines and social media sites as enablers of scams should also come into greater focus, he said, urging MPs to look at increasing accountability of online platforms for adverts and illegal activity on their sites, “not just taking it down, but doing much more from it appearing in first place”.
Police underestimates scale of the problem
The general lack of shared information on scams and low level of investigations has allowed scammers to keep operating undisturbed, suggested Margaret Snowdon, who chairs the Pension Scams Industry Group. She said in the industry the same companies, addresses and phone numbers are being encountered in connection with suspicious activities again and again, yet “we get very little, if any, intelligence back from law enforcement or regulators".
She accused the police of being ignorant of the scale of the problem, although she added that “I have seen some signs of better collaboration with Project Bloom”.
The key to reducing scams is to give trustees power to prevent suspicious transfers from going ahead, Snowdon said. PSIG and Phoenix Group have proposed an amendment to the pension schemes bill to this effect, which will be tabled by Work and Pensions Committee chair Stephen Timms.
What needs to be done to reduce the incidence of pension scams in the UK?