Online financial scams are accumulating a substantial toll within the European Union, as consumers continue to be defrauded at an estimated €4.3 billion in 2022, and similar trends continuing in the year after.
Sophisticated yet misleading advertisements have been pushed across major social media and technology platforms have become a primary conduit for these fraudulent activities.
Ireland’s stand: A push for pre-emptive action from tech giants
In response to the escalating threat, Ireland is spearheading an important initiative within the EU that proposes a rule change that would force Big Tech companies to vet financial advertisers before their advertisements are published.
At the core of this Irish amendment, which would add to the already extensive payment services regulation, is to mandate that only financial service providers (who are officially registered with national competent authorities) would be permitted to run financial ads within the EU.
Such a proactive stance is designed to shift the onus of initial verification onto the platforms themselves, in part because those with the broadest shoulders should bear the greatest burden. Though, the crux of the debate is simply that if a platform “airs” an ad, they should be responsible for it.
The debate has similarities to the debate of whether web hosting providers, particularly cheap and accessible providers like IONOS, should be responsible for the sites that they host. The proposal has gained a lot of eyes, and traction, with around half of EU member states reportedly expressing support. Though, figures like US President Donald Trump have previously advocated for scaling back the regulation of major American technology firms, so this could further stoke the fire of what appears to be the EU and US going head to head.
Digital Services Act and internal conflict
Ireland may well face internal conflict too, as a big challenge to the proposal lies in its potential conflict with the EU’s landmark Digital Services Act (DSA). Several EU diplomats have indicated that the European Commission sees a requirement for Big Tech to pre-vet online advertisers as contravening the DSA provisions, which generally don’t force platforms to conduct broad-based, proactive monitoring of content. Of course, broadly speaking, the mood around this topic might be changing, and Irish MEP Regina Doherty has countered that the requirement can be structured to align with existing law. Doherty claims it could focus on verifying the advertiser’s authorised status rather than policing the specific content of each ad, a little bit like how one must be FCA authorised to conduct crypto ads in the UK now.
Alternative suggestions also exist, like Poland’s proposal for streamlined communication between payment providers and platforms to facilitate post-fraud content removal. Though, this is deemed insufficient by industry critics who argue this reactive approach fails to address the speed and impact of initial fraudulent postings.
Supporting the need for more proactive urgency, the Bank of Ireland claimed that over 75% of its customers’ fraud losses during the past year come from investment scams, of which many are promoted online.
Creating a safer digital financial ecosystem
The growing crisis of online financial ad scams highlights that something needs to be done, and as is often the case, the EU is where it is most likely to happen. As Ireland pushes for this proactive amendment, we are yet to see how not only internal disagreements play out, but also how US Big Tech reacts to their ongoing battles with the EU.
