Contribution
My Lords, we come back to fraud. As the Minister will be well aware, this is not the first time I have raised the issue of ensuring that the technology and telecoms companies take their share of responsibility for the use of their services or platforms by fraudsters and are made to contribute to the costs of reimbursing victims. I thank the noble Baroness, Lady Morgan of Cotes, and the noble Lords, Lord Young of Cookham and Lord Holmes of Richmond, for their support on this amendment.
On a previous group I mentioned the Fraud Act 2006 and Digital Fraud Committee, on which I was privileged to sit. Our report, Fighting Fraud: Breaking the Chain, which was published in November 2022, made the very clear conclusion:
“Until all fraud-enabling industries fear significant financial, legal and reputational risk for their failure to prevent fraud, they will not act”.
That has been borne out over the three years since. There has been no significant improvement, despite the voluntary charters that have been agreed. Only the banks are on the hook for the costs of fraud under the mandatory APP reimbursement rules that were brought in by the Financial Services and Markets Act 2023. The banks must now pick up 100% of the reimbursement liability, and there is evidence to suggest that this is having a positive impact on the efforts that the banks are making to identify and prevent fraud.
Similarly, the Payment Systems Regulator’s six-monthly reports on the performance of the banks has provided welcome transparency as to which banks and payment services are doing most, and least, to combat fraud. As an aside, it would be good to have confirmation from the Minister that the subsuming of the PSR into the FCA will not reduce the important reporting and oversight of APP fraud that the PSR has been providing.
The banks are picking up the liability, but they are not where the fraud originates. According to UK Finance statistics, around 70% by volume and 30% by value arises from online platforms, and 16% by volume and 36% by value arises from telecoms—calls and texts. Let us name names. According to the PSR, over half of APP scams originate on Meta platforms—Facebook and so on.
Nothing has changed that would change the conclusion of the committee that these industries will not take the issue seriously until they face liability for what they allow to happen on their platforms or services. The banks have sharpened up their acts, in part because of the mandatory reimbursement requirement that we have imposed on them. The banks face real liabilities for the fraud that goes through their accounts.
The Online Safety Act includes some important measures to prevent fraudulent content and scam advertising, but it does not make the companies liable for the losses. We have mandated that the banks should reimburse victims of APP scams after we decided that the voluntary code was not working, and it is now time that those who enable the frauds should pick up their share on a compulsory, not voluntary, basis. There are many possible ways to achieve this, so I have not been prescriptive in the amendment. It could be as simple as bringing the telcos and tech companies into the reimbursement requirements, or we could look at extending the new failure to prevent fraud offence so that it covers the use by third parties of services provided by a company. The failure to prevent offence currently covers only actions by employees or associates, so it would not cover scams in this situation.
Amendment 67 would simply require the Government to bring forward proposals for how to do this within six months of this Bill passing. It is not enough to keep publishing more fraud strategies. The one that is due to be published shortly, which I am sure the Minister will refer to, will be the third fraud strategy since I have been a Member of this House. The Minister said earlier that the fraud strategy would be published soon—I think he said, “in very short order”. I know that he cannot give a date, but it would be helpful to know whether that will be before Report. The content of the strategy might make this amendment unnecessary, so it would be very helpful if we could see it before Report.
Fraud and scam figures are not falling; they still make up around 40% of all crime in the UK. It really is time that we make those who allow their services to be used by the fraudsters, and those who enable the fraud, liable for their actions—or, rather, lack of action. It is the only way to make them take the issue seriously. I beg to move.