Anthony Browne: How to ensure that social media companies compensate the victims of fraud

25 Apr

Anthony Browne is MP for South Cambridgeshire and a member of the Treasury Select Committee 

During the last few years, fraud has become the most common cause of crime, causing misery to millions of people  and destroying thousands of livelihoods. It has taken off so rapidly because the internet and mobile telephony have made it far easier for criminals to contact victims, and legislation and industry practice have not kept pace. Almost all fraud is now enabled by online firms.

In a recent Treasury Select Committee report, we suggested a whole range of reforms to tackle fraud, many of which the Government is taking forwards, and hopefully it will do more in an upcoming Economic Crime Bill in the new parliamentary session starting next month.

But online companies such as Google, Facebook, Microsoft, Instagram and WhatsApp also need to live up to their responsibilities. That means doing what they can to stop fraud happening in the first place, but also compensating victims when they have fallen for fraud promoted by the online companies. Unlike banks, they are refusing to do this.

At a Treasury Select Committee session, representatives of Facebook and Google squirmed when I grilled them about why they do not compensate victims, insisting that they wanted to stop fraud happening in the first place. It is a good ambition to eliminate all online-enabled fraud, but fraudsters are incredibly entrepreneurial, and will work out ways of evading whatever barriers Google and Facebook put in the way.

I have been speaking to ministers in all relevant Government departments; to consumer groups, fraud campaigns, and regulators, including the FCA, Ofcom and Payment Systems Regulator, and to online firms themselves, making the case that online companies that promote fraud should be made to compensate victims.

There is a simple moral argument: those who profit from fraud should pay the costs. This would provide relief to those customers who are not entitled to compensation from banks if they can instead get compensation from the online firm that advertised the fraud to them.

But there is a simple practical argument, too: as long as online companies profit from promoting fraud but don’t pay the costs, they will not have an internal financial incentive to invest in deterring it. The banks pay some of the cost of fraud, and I have seen first hand how that mobilises them to do whatever they can to reduce their fraud bills. If fraud compensation costs a company £100 million a year, it is worth its while investing in teams to stop it. Without that incentive, the task would become a regulatory box-ticking and communications exercise.

The principle of getting online firms to compensate victims is widely supported, and not just by consumer groups and fraud campaigners. In evidence to the Select Committee, ministers made it clear that they accept the principle of the argument: incentives need to be aligned.

It is clearly problematic to have one industry profiting from promoting fraud while others are trying to stop it. There are other ways to impose costs on fraud-promoting online companies, such as by fining them – but that does nothing directly to help victims, and requires strong enforcement of a well-targeted penalties regime. Experience tells us that there will be few fines, and online firms will simply focus on legal ways to avoid getting fined, rather than actually stopping fraud.

When the Select Committee said that online firms compensate victims of fraud, the recommendation was welcomed and made headline news, but it was also greeted with some scepticism from some commentators and officials: it’s a great idea in principle, they said, but how could it be made to happen? Well, here is how.

The scheme (called the Contingent Reimbursement Model) by which banks compensate fraud victims is voluntary – and flawed. All main banks are part of it, but some like TSB are not. The banks decide which victims get compensation and which don’t, with the result that levels of compensation vary massively from bank to bank.

The Government is legislating to make it mandatory for banks to be a member of the scheme, and also to have a standard set of rules to decide when victims should be compensated and when not (there is wide agreement that if a customer has been grossly negligent – for example, insisting that a bank transfers money to a fraudster they have been warned about – then the customer is not entitled  to compensation).

This new regime will be overseen by the Payment Systems Regulator, which is part of the Financial Conduct Authority. This legislation could be extended to cover online firms. The online firms do not have financial relationships with consumers, so the compensation should still be paid by the banks.

But the banks should then be able to reclaim the compensation from the online companies, either directly or through an industry fund, in the same way that insurance companies settle between themselves. Generally, it seems fair that banks and online firms pay half the compensation each, but in incidences where the bank is not liable to compensation, the online firm should pay all of it.

Obviously, online firms should only pay compensation when they promoted the fraud in the first place; but, equally, if they promoted a fraud, then the victim should always be entitled to compensation. It is not reasonable to expect individual consumers to be able to carry out greater due diligence than the world’s most technologically advanced companies.

The only resistance to this approach is from the online firms. They are worried about how such change would affect their profits, but the fraud bill will be small change for the richest companies on the planet. When they tell me their focus is eliminating all fraud in the first place, my response is: excellent – then you won’t have any compensation to pay.

The online firms are making a major strategic error. Like all firms, they have a licence from society to operate. They will lose this if they consistently defend the indefensible – and demanding the right to profit from promoting fraud while refusing to pay the costs is clearly indefensible.

It is inevitable they will have to do so, and it would be best for them to embrace the inevitable. Accepting that they should pay the cost of fraud would be a huge PR win for a scandal-hit industry, compared to being forced to do it kicking and screaming. After countless outrages, it would show that online firms have learnt their lesson: doing no evil needs to be more than just a motto.

Neil O’Brien: Trumpism in Britain. It’s time to call out those in the media who cynically feed the cranks, rioters and conspiracists

11 Jan

Neil O’Brien is co-Chairman of the Conservative Party’s Policy Board, and is MP for Harborough.

“Defoe says that there were a hundred thousand country fellows in his time ready to fight to the death against Popery, without knowing whether Popery was a man or a horse.” William Hazlitt, 1830

When supporters of Donald Trump stormed the Capitol building last week, many people in Britain probably thought that it was just the latest manifestation of a special sort of craziness that has gripped America. That sort of thing surely couldn’t happen here. Or could it?

The same evening, to far less fanfare, the Metropolitan Police arrested 21 people outside Parliament. On new year’s day, doctors leaving St Thomas’s hospital were greeted by a large crowd of protestors chanting “Covid is a hoax”.

These things are connected. They show that the same forces at work in the US are in some ways, already at work here.

Let me wind back a bit. Obviously, I mainly blame Trump for what happened in Washington. He did everything he could to incite the riot, in a brazen attempt to reverse his election defeat.

But other people made this possible too. The ragtag army of wannabe revolutionaries smashing up the seat of Americas democracy were radicalised by a whole ecosystem of shock jocks, social media cranks and conspiracy theories.

They’ve ended up living in a world of alternative facts, in which Trump is the sole bulwark against diabolical global conspiracies, and the President is the victim of an election “stolen” by a shadowy “elite”. In a world of such illusions, almost anything can be justified.
None of this is new. Trump was in a sense following the playbook of Lord George Gordon, who in 1780 whipped up fears of shadowy Catholic conspiracies, sparking vicious riots that left hundreds dead or wounded.

New forms of media often fuel revolutions. The printing press led to the reformation and wars of religion. The Cahiers to the French Revolution. The “Big Character Posters” spread the madness of Mao’s Cultural Revolution.

New technology has again changed things. First, Twitter, Whatsapp and online news have simply made political organisation much easier. The ‘colour revolutions’ in eastern Europe and ‘Arab spring’ were early demonstrations of their viral power.

But now the second shoe is dropping. What we are seeing now is the power of these technologies to create communities of radicalisation. Islamism is the most obvious example. A constituent of mine who lives in a pretty, sleepy village (with a lovely tearoom) was recently charged with seven terrorism offences. More and more, attacks come from those who have radicalised themselves online.

But Islamists are just one community of radicalisation. I was chatting to an apparently normal man this summer, when conversation turned to the coronavirus. He told me, with a matter-of-fact air, that it was all a hoax, set up by the New World Order who were planning a Great Reset, in which Big Business would take over and we would all be microchipped. I’ve had several similarly alarming conversations.

When people got their news from mainstream TV and radio news with strong legal obligations to be neutral, people were exposed to both sides of most stories. As has often been pointed out, people can much more readily be wound into a frenzy if they get their information from Whatsapp groups, people they follow on twitter and from agenda-driven ‘news’ sites.

But the idea of “filter bubbles” doesn’t really do justice to what new media is enabling. People aren’t just passively consuming news they agree with. People are building communities. People they ‘know’ from chat and comment threads. Making likeminded friends on twitter.
Indeed, conspiracy theories like QAnon represent a kind of enjoyable ‘game’: crack the code to understand the shadowy conspiracy!

The US has gone further down the road of polarisation than other places. People increasingly live with in neighbourhoods with likeminded people. The national conversation has been curdling for decades into extreme left and extreme right bubbles, with disastrous effects on politics.

The same technologies are having similar effects here. If we had faced the current pandemic in, say, 1992, how would you have got news about it? Perhaps there would have been a “Covid-92” page on Ceefax.

But if you’d wanted to spread the idea that vaccines are poisons, dreamed up by Bill Gates, you had nowhere to go but Speakers Corner really. So the man I met this summer, who so readily absorbed all this nonsense, would simply have been unlikely to encounter such ideas. These days, someone like Toby Young can set up a website to give people a dose of covid-sceptic propaganda every day. Crank “scientists” can rapidly gain a huge following on twitter.

Social media has changed how we live. In my first job in politics, working for Business for Sterling in 2000, I used to fax a press summary each morning to about 20 people. At the time, there was a well-written Eurosceptic newsletter called Eurofacts, which was photocopied and posted around to about 1,000 people once a month.

Until the next month, that was your hit of single-currency-scepticism. You had to go off and think about something else. Sure, some newpapers campaigned hard on both sides of the euro question. But reading the papers, even daily, just couldn’t absorb your attention in the way social media does.

Looking back, those were the mild-ale days of political communication. These days, people can become hooked on the crack cocaine of issue-driven social media.

Take the SNP cybernats. They can read a daily newspaper promoting Scottish independence, then go on a website or twitter all day to chat with other cybernat friends and wind each other up.Did you hear the one about the “secret oilfields” the UK government is mysteriously covering up, to do down Scotland? When people form such intense groupthink bubbles, they can come to believe almost anything.

We can’t uninvent social media, which also has many benefits. But we do need to adapt to it. In the US, fringe ideas like the QAnon conspiracy theory built up online. But their spread has been accelerated by the willingness of broadcasters and politicians to flirt with them to gain clicks and exploit their energy.

If we are going to avoid our national conversation going the same toilet, we need strong mainstream media. But we also need those in positions of power in the media to behave responsibly.

For example, one of the best selling papers in the UK recently ran a piece promoting the views of an “NHS worker” who claimed hospitals were “empty” and Covid was a “hoax”. If it had taken a quick look at her Facebook page, they’d have seen her celebrating the burning down a Jewish-owned bank, as part of a “great awakening”.

We need people in positions of power in the media to practice some basic hygiene about whose views they are promoting. Parts of Britain’s media have spent the Coronavirus pandemic doing everything they can to downplay the seriousness of it and set bogus stories running by publishing the claims of cranks. Professional contrarians have fed people misleading nonsense to get clicks: carrying on their business-as-usual, even in a life-or-death situation. As hospitals hit crisis point, they should reflect on their actions.

The attempted putsch in Washington didn’t come out of nowhere. It has been decades coming. It happened not just because of one man, but because people in positions of power made short-termist decisions to feed the beast, and play along. Don’t think it couldn’t happen here.