Fraud during the pandemic: might the government amend its Online Safety Bill?

The Covid pandemic has proven exceptionally lucrative for fraudsters. Statistics measuring the scale of financial loss vary because they capture different forms of loss. Whatever the precise figures may be, according to the Office for National Statistics, 4.4 million people in the UK said they had been the victim of fraud in 2020, losing £2.3 billion. Fraudulent activity peaked, moreover, between April and May 2020, and January 2021, which were both periods when lockdowns were in full force.

Recent patterns of financial criminality are distinguished by their online character. Fraudsters have exploited our heightened internet presence during the lockdown to advance a variety of criminal schemes. According to “Fraud – The Facts 2020”, which is compiled by the banking and finance industry body, UK Finance, there has been significance growth in social media fraud, which includes romance scams and investment and purchase fraud. Indeed, in 2020 the Dedicated Card and Payment Crime Unit shut down more than seven hundred social media accounts engaged in said schemes. Furthermore, Action Fraud, the national reporting agency, said that £78 million was lost on fake investment websites, with victims losing £45,242 on average in 2020.

Young people, the so-called “Generation Covid”, have been especially targeted to operate as money mules. This has involved people giving fraudsters their bank details to receive funds before transferring them to other bank accounts, in exchange for a fee. The fraud prevention group, Cifas, has identified more than 17,000 suspected cases where people aged 21-30 had participated in these enterprises.

For lawyers, the salient question is what steps the government might or might not take to address this problem. In December 2020, the government stated its intention to exclude economic harms from the purview of its proposed Online Safety Bill, which will place internet companies under a statutory duty of care to remove harmful content from their platforms. The proposed legislation will impose GDPR-style fines for failures, rather than initiating criminal prosecutions. Limitations were placed on the scope of the regulations, however, despite lobbying from UK Finance and Cifas to include fraud within their ambit. Indeed, in a 2019 report, the former group was adamant that public-private sector partnership was essential to combatting the growing problem of internet criminality.

This possible lacuna in the government’s approach has received renewed attention this month following reports that the Bank of England Governor, Andrew Bailey, has been lobbying the Home Secretary to use the forthcoming legislation to make internet companies liable for financial fraud. His efforts echo the chairman of the Work and Pensions Committee, Stephen Timms MP, who has indicated he is preparing to table an emergency amendment to the bill in the coming weeks. As Timms explained, the problem is magnified by the fact that online platforms are currently profiting “from scam adverts and fake websites and… from ScamSmart adverts published by the Financial Conduct Authority as well.” This renewed pressure is noteworthy because the government previously suggested its preferred approach was to clamp down on online fraud through additional legislative and non-legislative solutions.

It remains unclear what steps the Government will adopt. Given this uncertainty, criminal and civil practitioners alike should pay attention to two forthcoming developments.

1. First, the Department of Digital, Culture, Media and Sport is likely to publish its review into misleading online advertising later this year. This report is expected to shed light on any novel policies the government might implement to tackle fraud.
2. Second, in the event the Online Safety Bill is amended, the nature and conduct of business crime could change as internet companies become relevant parties to civil and criminal fraud investigations. Practitioners should remain alert to the prospect of adapting their litigation strategies.

Whichever pathway is chosen, the pandemic has ensured that business crime is a field on the move.

Peter Lownds and Sapan Maini-Thompson