Social media platforms ‘should have to verify ads’, says banking federation

Before accepting an ad, the platforms should have to check with national authorities that the company involved is authorised to provide the financial product or service being offered, the federation says.

Companies who don’t complete the verification process should not be allowed to show ads for financial services.

“This advertising verification process was recently introduced by Google here in Ireland, something it also has in place in a number of other countries,” a spokeswoman for the representative group said. “We see this a hugely positive initiative in terms of addressing fraud, particularly investment fraud, and are strongly advocating that it should be incorporated as a requirement into the Payment Services Regulation (PSR).”

The European Commission is proposing to turn elements of the Payment Services Directive into a regulation. In a position paper responding to the proposal, BPFI says the underlying reasons for fraud will not be addressed if the focus is only on banks having to reimburse victims.

“By incorporating near-automatic liability requirements into the regulation, this has the potential of reducing customers awareness of fraud attempts, while introducing significant moral hazard into the financial system – especially if the types of fraud under consideration go beyond bank impersonation,” BPFI’s paper says.

“At the same time, it could lead to an increase in ‘friendly fraud’ where the customer claims to be exposed to fraud, but in reality, is in collusion with the fraudster.

“This can in turn lead to an increased exploitation of young people and other vulnerable customers for the purpose of money laundering.”

Making the case that online platforms need to be held more responsible, the BPFI says the experience of its members – which include AIB, Bank of Ireland and PTSB – is that most payment fraud originates on social media, yet is often not acted on.

If there was a clear mandate requiring online platforms to only publish ads for financial products and services regulated by a national authority, it would “greatly assist in fraud prevention”, BPFI argues.

Recent research commissioned by Bank of Ireland from Red C found that one third of those surveyed said they had been targeted by a fraudulent advert on a social media platform. Asked to identify the platform, 65pc said Facebook, 28pc said Instagram, with X at 13pc and TikTok at 11pc.

Almost one in two adults had seen ads for investments or crypto on a social media platform featuring a well-known personality. The impersonation of celebrities is a tactic regularly used in fraudulent ads to trick consumers into buying fake products.

The bankers’ federation says its members have experienced difficulty with getting ads not related to their own brand taken off social media sites. They say incentives for online platforms and telecoms companies to collaborate in tackling fraud are reduced if the full financial burden of compensating victims is carried by banks.

“While it is welcome that the draft PSR puts forward the proposal that other parties within the fraud chain should ‘cooperate closely’ in the prevention of fraud, without specific requirements on these sectors – especially in the absence of liability – it will be challenging to establish a well-functioning cross industry collaborative approach,” their paper says.

The federation says that policymakers could explore creating a levy which electronic communication providers would be subject to, based on a “polluter pays principle”.