A director at TSB Bank has warned a group of top MPs that Facebook Marketplace and cryptocurrency investment are major breeding grounds for scams amid calls for Big Tech to take more responsibility for a wave of fraud on social media.
The Home Affairs Committee heard from major banking and communications firms heard on Wednesday as part of its inquiry into fraud, which makes up around 40 per cent of crime in England and Wales.
Paul Davis, financial crime prevention director at TSB, told MPs that around 80 per cent of the main types of scams its customers experience originate on social media.
“Indeed, let’s not walk past the fact that when I say social media there, the majority of them start from the channels owned by one company in particular, which is Meta,” he added.
Latest data from banking trade body UK Finance showed that Britons lost £580m to scams in the first half of 2023 alone.
Davis said Facebook Marketplace was the main breeding ground for purchase scams, with customers not receiving items after sending money to sellers.
“We see this impacting all kinds of items. You name it, trainers, electrical goods, games consoles, pets, and cars, caravans, literally anything,” he said.
Davis added that his team used their personal Facebook profiles to “engage with 100 sellers, 100 items, on Facebook Marketplace” and found that “about a third of them were probably fraudulent”.
Woody Malouf, global head of financial crime at Revolut, told MPs that social media firms could support payments firms by being more transparent with their fraud data.
“That would massively help us, not just in detecting unusual activity but then in the intervention itself,” he said.
New measures from the payments regulator set to come into force in October will hold sending and receiving firms equally liable for reimbursing victims of fraud up to £415,000.
The banking industry has criticised the measures for not placing enough responsibility on social media companies.
Philip Milton, public policy manager at Meta, which owns Facebook and Instagram, told MPs in a separate session that the company “had taken a number of different actions” to mitigate fraud and was “directly incentivised” to prevent criminal activity.
When the committee referenced evidence from the banking companies that Meta could do more to prevent scams, Milton said: “I disagree with that. To give you an idea of the scale that we’re putting in place to tackle this kind of thing, since 2016 we’ve invested $20bn on safety and security, and that’s not slowing down – $5bn of that was in the last year alone.”
He added: “We removed the ability to ship an item on Facebook Marketplace. So there is no way to pay for an item on Facebook Marketplace, and there is no way to ship an item on Facebook Marketplace. And that is precisely because we were trying to design out the ability for fraudsters to use the platform for those purposes.”
Crypto risks
Figures published by Lloyds last November showed a 23 per cent rise in cryptocurrency scams reported by its group’s customers in the first nine months of 2023 compared to the same period in 2022.
Lloyds estimated that nearly two thirds (66 per cent) of investment scams originated on social media – most commonly Instagram and Facebook.
TSB blocked all payments to crypto exchanges in 2021 due to fraud fears, while Santander, which was also represented at Wednesday’s hearing, put a cap on these payments last year.
Davis told MPs that before the block, one in five TSB customers who purchased crypto via faster payments “would ring us up later and tell us that they’d been defrauded, which is a staggering rate of fraud”.
Chris Ainsley, head of fraud risk management at Santander, added that its limit had reduce crypto fraud by 97 per cent.
“So, in reality, the restriction of that fraud, the value of that was estimated to have been tens of millions of pounds in a year that would have gone to those cases,” he said.
A league table published by the Payments Systems Regulator last October showed that TSB fully refunded 94 per cent of customer scam claims in 2022, while Monzo reimbursed just six per cent.