Lloyds Bank fired a volley at Facebook owner Meta this weekend for failing to stop a ‘Wild West’ spate of online shopping scams. Britain’s largest retail bank – which has 26 million customers – accused the social media giant of enabling so-called ‘purchase fraud’.
The banking group claimed that two-thirds of scams start on platforms owned by Meta, which also includes Instagram.
Banks and insurance groups have been frustrated for years that social media companies are not obligated to pay victims their fair share of damages for fraud hosted on their platforms.
But it’s highly unusual for a lender like Lloyds to target an individual tech company like Meta.
The move puts Lloyds Banking Group boss Charlie Nunn at odds with Facebook mogul Mark Zuckerberg.
Face-off: Lloyds Banking Group boss Charlie Nunn and Meta executive chairman Mark Zuckerberg
UK banks have previously urged ministers to crack down on online financial scams amid concerns that criminals are using Facebook and Google to post fraudulent ads with impunity.
The failure of internet giants to verify the authenticity of digital advertisements has led to a spate of scams, they say. These include brand cloning, where criminals impersonate legitimate companies to trick victims into giving up their savings. Purchasing fraud usually targets younger consumers who are tricked into paying for desirable items that don’t actually exist.
Victims are lured by offering a cheap deal – often advertised on social media – and then asked to send money from their own secure online bank account directly to the seller through a wire transfer system known as Faster Payments.
However, this offers little protection if something goes wrong.
The scam is a small but growing part of online fraud, which now accounts for 40 per cent of all crime and costs £7 billion a year, according to the latest government figures.
Purchasing fraud has risen 40 percent since the start of the pandemic to more than 117,000 by 2022, according to the UK’s financial trade organisation. of supply chain problems.
Lloyds, whose brands include Hailfax and Bank of Scotland, estimates someone falls victim to the scam every seven minutes on a platform owned by Meta, which has cost consumers £27m this year alone.
The average amount of money lost by purchase scam victims is around £570. Clothes, sports shoes, game consoles and mobile phones are among the most common goods that are falsely put up for sale.
Lloyds said it reimburses ‘the majority’ of victims and has invested ‘hundreds of millions of pounds’ in security systems to beat the scammers.
But repayments do not address the emotional trauma of being a victim of fraud or stop the flow of money to organized crime, it added.
“Social media has become the Wild West of online shopping in recent years, with very few controls to track who is selling what,” said Liz Ziegler, director of fraud prevention at Lloyds Banking Group.
The government’s new national fraud strategy gives banks more time to delay suspicious payments. But Ziegler said banks can’t fight the “scam epidemic” alone.
“It’s about time technology companies share the responsibility for protecting their own customers,” she said.
“This means stopping scams at the source and contributing to refunds when their platforms are used to scam innocent victims.”
An amendment to the long-delayed Online Safety Bill requires social media companies to prevent paid fraudulent ads, whether the ads are managed by the platforms or an intermediary. It followed pressure from consumer groups, charities and the banking industry who claimed the government’s approach to tackling online fraud was ‘flawed’.
But critics say the proposals still don’t go far enough. “Fraudsters don’t just pay for ads or create fraudulent content that falls within the scope of the bill,” said a banking industry source. “Excluding online marketplaces like Facebook’s is therefore a major loophole.”
Activists say only the threat of fines will compel social media companies to act.
“Without sanctions, they have nothing to stop the scam,” said consumer champion Baroness Altmann. She fears that the government is “absolutely terrified of upsetting the tech companies” and of being seen as suppressing the free market.
James Daley, founder of consumer campaign group Fairer Finance, said social media sites had become “a gateway for fraudsters.”
“Companies like Meta have a clear responsibility to act and protect their users,” he said. “But based on past experience, it’s unlikely that these companies will do much if they don’t have to.
“The government announced plans last year to introduce new security measures, but they have now been kicked into the bush again.”
Meta said purchase fraud was “an industry-wide problem” with scammers using “increasingly sophisticated methods” to scam people “by a variety of means, including email, text and offline.”
A spokesperson said: ‘We don’t want anyone to fall victim to these criminals, which is why our platforms have systems in place to block scams. Advertisers in the financial services industry must now be authorized by the Financial Conduct Authority.”
The Ministry of Science, Innovation and Technology has been approached for comment.
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