The Financial Conduct Authority (FCA) has reiterated its call for social media firms to take more action to identify and prevent illegal financial promotions.
Over 20,000 financial promotions were withdrawn or amended last year following FCA intervention, the regulator revealed. Promotions for cryptoassets, debt solutions and claims management were the FCA’s main area of concern.
Claims management in particular seems to have made up the bulk of concerning social media promotions in 2024, with 9,197 withdrawn. The FCA notes that the total number of promotions withdrawn or amended was nearly double the amount in 2023.
Lucy Castledine, Director of Consumer Investments at the FCA, said: “Over the past year, we have seen a growing number of misleading and illegal financial promotions. We have stepped up our efforts in response to make sure that financial promotions are clear, fair, and accurate.
“We expect firms to take the necessary steps to meet standards and will continue to work with other bodies, including social media platforms, to prevent illegal promotions being pushed at consumers.”
The social media scam problem
Social media has become a bit of a headache for UK financial services and the regulators overseeing the sector for much of 2024. For the FCA, financial influencers or ‘finfluencers’ have been a particular pain.
The FCA stated last year that it had encountered numerous cases of influencers promoting scams, with 38 warnings issued to social media accounts for potentially sharing illegal promotions.
As the majority of young people have a social media presence and follow influencers, the FCA is particularly concerned about the impact these accounts could have on this demographic.
Financial influencers have become particularly popular as young people look to diversify their income streams and find new ways to make money in challenging economic circumstances.
Meanwhile, regulators like the Payment Systems Regulator (PSR) are also coming across problems relating to social media. Last year, the PSR introduced new rules requiring UK payments firms to reimburse victims of fraud to a cap of £80,000.
Many banks, including Barclays, Lloyds, TSB, NatWest and Revolut, have argued that social media firms should also have responsibility for this. The banks’ argument hinges on the notion that many or even most scams in the UK are perpetrated using social media platforms to either advertise a fraudulent investment or product or reach out to a victim.
The government appears to share some of the banks’ concerns, at least it did prior to the July 2024 election.
Reports prior to Labour’s victory suggested that the party was open to the idea of making Big Tech firms, such as social media operators Meta and X, take on some responsibility for preventing and reimbursing fraud.
This has not yet materialised in policy or legislation, as the government is more preoccupied on other areas of finance and technology such as Open Banking, AI, digital asset ownership and general investment, though it has given new fraud prevention powers to banks.
