The Financial Conduct Authority (FCA) says it has stepped up its’ fight against finfluencers and other financial crimes, but concedes that resources and court backlogs are acting as a brake on quicker progress.
Asked by Labour MP and Treasury Committee member John Grady MP how the FCA was dealing specifically with finfluencers and whether it would increase prosecutions, FCA chief executive Nikhil Rathi said the regulator took its role to protect consumers in the mid-low income brackets very seriously as they were most vulnerable to unscrupulous unregulated online ‘advice’ services.
Rathi said finfluencers were a significant and increasing phenomenon across social media with FCA data showing around 36% of adults accessed social media for their financial information and advice.
“We have been very proactive with the big tech firms to make sure that they only allow paid for financial promotions from firms that are registered with us. Finfluencers often operate cross border so while we have made a number of charges some won’t get to trial until 2027 due to the backlog in the courts.
He added: “We continue to undertake arrests, these gangs tend to operate cross border which is why we have collaborated with our colleagues in a number of other jurisdictions. We have massively scaled up our work to take down problematic financial promotions, last year 20,000 were asked to be taken down or withdrawn compared to 570 a few years ago.”
Going forward, Rathi said that in terms of numbers of prosecutions, FCA was incredibly active in both prevention and enforcement and in time we would see whether that was reflected in numbers going up or not.
“To get successful prosecutions will take time as these things have to go to trial and we have to wait and see what judges say. And we have to look at our overall financial crime work and this (finfluencers) is just one aspect of it. We have to make choices across the breadth of financial crime of how we deploy resources.
Big tech
On the subject of FCA working with the big tech firms, Lib Dem MP Bobby Dean asked whether the big tech firms tended to be reactive rather than proactive. Had the FCA been in discussion with big tech about doing more?
Rathi said that was happening but that the FCA had to operate within its powers and could not force the big tech firms to take down promotions that the regulator regarded as problematic. In some instances the tech firms were co-operative and proactive but not in all cases.
“It is not just the speed at which promotional material can be taken down but also how quickly new accounts can be created with almost identical content.” He explained that as things stand it is the FCA (not the platforms) deploying resources to search for these repeat promotions.
Rathi agreed that an ongoing argument was who should pay or share the bill for any compensation for rogue financial promotions that hurt consumers’ pockets.
Committee member and Labour MP Dame Siobhain McDonagh suggested finfluencers were able to mislead consumers partly due to a lack of financial understanding. She asked whether improved education was an important factor and whether building societies and mutuals could play a bigger role in terms of advice on product awareness and risk.
“There will absolutely be a greater role for building societies and mutuals in providing more information and we think there is quite a lot people can do already, it is a question of risk to clarify when simplified advice can be provided and also put in a regime for targeted support so you can give advice to cohorts of consumers rather than just relying on personalised advice; and also digitalises advice services making that much more feasible,” Rathi said.
In terms of financial education in society, Rathi conceded that compared to some other countries, the UK clearly had some work to do to improve.
