Is Facebook about to fall foul of new fraud laws?

This week the anti-fraud provisions of the Online Safety Act start to become enforceable. This could mean huge fines for social media firms that break the law by carrying fraudulent content. Yet our investigation shows that Facebook is still carrying numerous adverts for investments that might be seen to break the new law, says Andrew Penman

Online safety groups have condemned Facebook for carrying adverts that target savers with high-risk investments.

The criticism comes as the Online Safety Act, with fines of up to £18m for promoting fraudulent content, becomes enforceable.

Besides potentially falling foul of the law, the adverts also appear to breach Facebook’s own safeguarding policy which states that it will only accept promotions for investments that are regulated by the Financial Conduct Authority.

In one extreme example, an advertisement offered daily yields of six per cent from a “revolutionary” cryptocurrency.

When compounded, that equates to an annual interest rate of more than 1,700,000,000 per cent.

The Facebook account is called Biswap Wealth and gives no contact information and could only be reached by Facebook messenger.

When asked for its business address details, the evasive reply was: “Our platform is decentralised”. The account stopped replying when told it was being messaged by a financial journalist.

Biswap Wealth is not regulated by the FCA, and cryptocurrency is largely unregulated, but that did not stop it being able to target savers on Facebook.

The watchdog also does not regulate investments in wine, whisky, gold and art but our investigation found adverts for all of them on the social media platform, typically with boasts of huge supposed returns.

One plug for wine claimed: “149 per cent growth in the last decade” while another for gold gushed: “The price of gold has risen 722 per cent since 2004.”

An art gallery’s Facebook ad tempted: “Grove Gallery’s revolutionary investment opportunity lets you own luxury art while our five-star partners rent your pieces. You’ll earn monthly income while your art appreciates in value.”

When asked why the company was advertising an unregulated product on Facebook, director Stacey Dawes replied by questioning the FCA’s value.

“The FCA has been at the helm of multiple financial scandals and has failed thousands of investors under its so-called regulatory framework,” she said.

13,600 per cent returns?

An advert placed by the unregulated Sustainable Times ran: “13,600 per cent returns? It’s possible. Discover how investors capitalised on tax benefits under the UK Government’s Enterprise Investment Scheme initiative.”

Sustainable Times director Harvey Knight denied that the advert breached Facebook policy, saying it linked to editorial content, not financial advice.

“Where content may introduce investment opportunities, we ensure these are accessible exclusively to individuals who have self-certified as high net worth individuals or sophisticated investors,” he said.

One advertiser was not just unregulated, it used a website that is on the FCA’s consumer warning list.

Axis Capital Partner’s plug on Facebook offered 15 per cent annual returns, claiming: “Invest confidently in Government-approved social housing deals”, with one post inviting savers to go to axis-wealth.com.

This website, now unavailable, featured in an FCA alert published last July that warned: “This firm may be providing or promoting financial services or products without our permission. You should avoid dealing with this firm and beware of scams.”

Questions to Axis Capital Partner were answered by someone using the name Rebecca, who refused to give a surname or contact details for the business.

“Get a court order and I will happily share my full contact details with you,” Rebecca emailed.

She did not explain why Axis Capital Partner had used a website that is on the FCA’s alert list.

A reporter posing as a potential investor replied to its Facebook advert and was emailed by a business called New Capital Link offering investments in an unregulated property firm, promising “competitive returns, risk mitigation and strong security”.

Far from being secure, the investment was in loan notes. These have little security, as admitted in small print which warned of “significant risk of default and loss of capital”.

New Capital link managing partner Alex Santos said: “We are trying to get an understanding as to who Axis Capital Partner are and how a lead has come through their platform and arrived with us.”

This mass of investment adverts was slated by public-private sector advice body Get Safe Online.

Anyone who does anything on Facebook is taking a risk, whether it’s looking for a holiday, buying a concert ticket or making an investment

“Anyone who does anything on Facebook is taking a risk, whether it’s looking for a holiday, buying a concert ticket or making an investment,” said chief executive Tony Neate.

“Facebook claims that it only carries financial advertising that is placed by FCA authorised firms.

“This assurance could lure users into a false sense of security because there is ample evidence of unauthorised financial services firms advertising on the platform.”

Simon Miller, director of policy at fraud prevention service Cifas said: “These adverts should not be appearing.

“The rules around firms advertising investment products are clear, they have to be authorised by the FCA.

“The real test now will be how Facebook responds to legal obligations with significant bite as a consequence of the Online Safety Act being enforceable.”

From 17 March Ofcom will be able to use the Act to take action against illegal user-generated content on social media, with paid-for advertising being tackled later in the year.

“We won’t hesitate to use our robust enforcement powers against sites that don’t comply with these duties – which include being able to issue fines of up to 10 per cent of turnover or £18m, whichever is greater,” said a spokesperson.

Facebook did not respond to invitations to comment.

Andrew Penman is a freelance journalist

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