IOSCO issues new warning addressing the rising threat of online fraud


The International Organisation of Securities Commissions (IOSCO) has issued a warning relating to the heightened risk of online investment fraud and scams for retail investors. 

In particular, IOSCO highlights that dangers causing financial harm could be hiding at every corner, ranging from misleading social media adverts and online promotion of risky investments to other investment scams, which often involve digital assets. 

Also mentioned in the warning is that the “borderless nature” of the online environment presents a limitless sandbox for criminals to continuously innovate fraud methods, capitalising on emerging technologies such as blockchain and crypto assets. 

Another tool that could potentially be harvested to cause significant disturbances is Artificial Intelligence (AI) due to its application in all facets of society, IOSCO further stated. 

Jean-Paul Servais, Chairman of IOSCO, added: “Buying investment products and services online can bring significant benefits for retail investors such as convenience and reduced costs.

“However, the easy availability of investment products and services online brings an increased risk of fraud. Retail investors are at risk of falling victim to ‘bad actors’, who take advantage of them through online scams, which can lead to significant losses of money.

“We will continue our work to combat online fraud through rigorous enforcement efforts and by informing retail investors so they are vigilant to the risks and can take precautions to avoid frauds and scams. 

“We urge retail investors to only use reliable sources of information; to not invest too much money in one single product; and to never invest more money than you can afford to lose.”

As a joint initiative between global securities regulators, IOSCO has more than once welcomed the growing participation of online investors and increasing volume of retail trading as contributing to financial inclusion and development of capital markets. 

However, the watchdog has also noticed the parallel rise of bad actors utilising sophisticated tactics to lure in investors and exploit them through schemes that often have a global reach. 

As a result, IOSCO further noted that regulators continue to be overwhelmed by complaints about the online distribution of fraudulent services, including those mimicking legitimate gambling and crypto products, which lead to widespread losses for retail investors around the world. 

To counteract this, the organisation is calling for increased collaboration and deepened links at the global level between regulators, law enforcement and all relevant stakeholders in the broader online ecosystem.

“As part of IOSCO’s continuing efforts to promote investor protection and ensure fair, efficient and transparent markets, IOSCO issues a call to action to regulators to respond holistically and innovatively to online harm, including by working with players in the broader online harm ecosystem,” the organisation explained.

IOSOCO’s statement on the matter suggests that the signing of Memorandums of Understanding and the setting up of various education initiatives as potential avenues to explore in the future. 

“It is vital for all parties to come together and proactively collaborate to identify and tackle these issues at their root. This will enhance the protection of investors in the digital age, leading to confidence in the financial markets, which is key to thriving economies.”

To read through the full IOSCO document, click here