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FCA engages with social media platforms to protect ‘unconventional’ investors

In light of this development the threat landscape for consumers has shifted, Rusu said. Fraudsters and scammers are benefitting from new technologies, she added during a speech at the CDO Exchange for Financial Services.

“Cryptocurrencies are a great example. Although crypto provides a potential area of benefit for firms in terms of improving efficiencies and driving down costs – it also provides a serious potential for exploitation and harm”, Rusu explained.

She highlighted that new kinds of consumers are being drawn to these markets for reasons that are not always conventional or rational. 

A recent FCA survey indicated that more than three-quarters of people investing in high-risk products are motivated by competition with friends, family and acquaintances. More than half say that hype on social media and the news drove their decisions, according to results.

Influencers on Youtube, Instagram and TikTok are having a growing impact on younger investors in particular, who do not necessarily understand the risks they’re taking. The majority of people who’ve bought forex or crypto do not understand that these are unregulated and unprotected, according to Rusu. Therefore, cryptocurrencies continue to be high risk for consumers, highly volatile for markets, and highly likely to be used in financial crime, she added.

The FCA has been focusing its efforts to protect customers by warning consumers about the risks involved through traditional strategies, according to Risa.”We’ve been educating consumers with our Scam  Smart and InvestSmart campaigns, reminding them to fully understand what they’re getting into and to appreciate the risks involved.”

And as much as social media is a risk, it is also an opportunity when it comes to consumer protection, she continued.

“We’ve been engaging with social media platforms ensuring they are complying with laws that prevent communication of unregulated investments. Search engines and social media have to comply with laws on scam advertising just like newspapers and television channels.”

“And we’re pushing to make the laws themselves more robust – which is why we want to see the proposed Online Safety Bill clamp down on scams being promoted through digital adverts and websites,” she added.

The FCA’s digital listening tools help to collect data on everything from mortgages and investments to fraud and scams. For example, listening to discussions on social media showed the difficulties in the insurance markets during the pandemic, Rusu said.

She explained that consumers were finding it hard to get insurance companies to pay out, while firms were finding they couldn’t claim for business interruptions. “All of this was hugely disruptive.”Our intelligence helped us act swiftly and decisively, she continued.

The FCA’s legal action won businesses more than three-quarters of a billion pounds for losses relating to covid. Its guidance responded directly to the concerns that consumers were raising, according to Rusu.

“It’s a great illustration of early insight informing a robust response,” she said.

A data-driven industry needs a data-led regulator which understands how data is used. A regulator which leverages the same techniques as in industry to prevent harm, tackle poor practice, and support innovation and growth, Rusu added.

“Because data does not just give us the means to understand the world – but the tools to improve,” Rusu concluded.

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