If you’re a regular user of social media or search engines, you have probably seen adverts in your feed or search results trying to convince you to get in early with an unmissable investment opportunity, to buy the latest crypto that will go to the moon, or even to buy a bond that guarantees an attractive fixed return. The problem is there is a good chance that these adverts are fake, but how are you supposed to know that?
This is the problem at the heart of the EU’s new Digital Services Act (DSA). Unless you work in tech, you probably haven’t heard of this legislation.
Its main goal is to prevent illegal and harmful activities online and the spread of disinformation. It has included fraud and scams in the definition of illegal activities but while it has only been in operation for a little over a year, it has become clear that it can’t protect consumers from online fraud.
This is mainly due to the principle underpinning the DSA, which is it is the responsibility of general users (that’s you) or “trusted flaggers” to identify fraudulent adverts and report them to the platform. It is then the responsibility for the online platform to investigate these reports, and take action if deemed necessary.
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In policymaking, this is a classic example of a good concept in theory, which doesn’t work in the real world. Let me explain why.
The most obvious problem is that scam adverts only need to be online for a very short time before they can successfully target someone.
Many scam adverts involve getting someone to hand over their contact details, such as their mobile number or email address, so even if the advert disappears the scam continues directly between the criminal and the innocent victim.
[ Stricter rules to combat scam social media adverts proposed by GovernmentOpens in new window ]
For larger investment scams, it can take weeks or months to convince a victim to send large sums of money. Then, the victim may only realise that they’ve been scammed when they try to withdraw funds – in some cases many months after the actual fraud took place. By then, of course, the original scam advert has long disappeared into digital oblivion.
The next problem is that the vast majority of general users won’t have any idea that they are being served fraudulent adverts and therefore won’t report them to the platforms.
Whack a mole doesn’t even begin to describe the scale of the challenge
The DSA tries to address this by creating trusted flaggers or sector experts in each EU country that can report suspected fraudulent adverts to the platforms and for the platforms to act quickly on these reports.
However, digital adverts are not like adverts in a newspaper that everyone can see – they are targeted at specific categories of users based on what the platform algorithm decides to show them. A trusted flagger may never see a fake advert that is served up to you.
And finally, digital adverts are practically unlimited. Criminals can create new accounts and new adverts and deploy them at speed and at scale. You might successfully remove one advert, only to see 10 other accounts serve up the same fake advert.
Whack a mole doesn’t even begin to describe the scale of the challenge.
There is a simple solution. Within the EU and the UK, all firms that sell financial services must be authorised by a local or EU regulator.
To prevent fraudulent adverts for financial services ever reaching the general public, online platforms should be obliged to check they are dealing with a regulated entity before they publish an advertisement – for which advertising service, let’s not forget, they are charging a fee.
This is a simple, practical solution that would prevent huge numbers of fake advertisements from ever being published.
Financial scams and fraud, often originating online, are the new front line of financial crime. It is a serious criminal enterprise that steals billions from European consumers every year to fund other criminal enterprises including terrorism, drugs smuggling and human trafficking.
However, the Digital Services Act is not fit for purpose in tackling this serious problem. For this reason, the Irish Government is to be commended for having proposed changes to EU legislation to introduce advertiser checks for the very large online platforms.
In a year when the EU is also looking at new proposals to support retail investing by everyday consumers, it needs to address the vast amount of online scams that will only discourage consumers from taking the leap into investing.
The sooner that policymakers accept that the DSA is not the solution to this urgent problem, the quicker new protections can be rolled out to protect EU consumers and cut off a large revenue stream for criminality. Every day matters in the fight against criminal fraudsters.
Susan Russell is chief executive of Retail Ireland at Bank of Ireland
