Around 800,000 people reported losing money to investments or pensions related scams in the 12 months to May 2024, according to FCA research.
To help fight financial crime, the FCA has launched ‘Firm Checker’, a new tool to help consumers avoid scams. By using the tool and checking if a firm is authorised and has the correct permissions to provide services, the regulator hopes people can significantly reduce their chances of falling victim to fraud.
The FCA's research found that those who had experienced any Authorised Push Payment (APP) fraud or unauthorised consumer investments or pensions-related fraud, were most likely to have heard about it by seeing it promoted on social media – around 1 in 6 (17%) - or via a telephone call (17%).
16% were initially approached via text message, WhatsApp or another messaging service.
Scammers can make it difficult for consumers to know if they are dealing with the real firm. In addition to checking if a financial services firm is authorised by the FCA for the services being offered, people should also confirm that the contact details match those listed on the FCA Firm Checker.
The research also found consumers are taking some precautions to protect against fraud but there is room for improvement. Around three in four (72%) adults said they always or usually reject or ignore unsolicited calls, emails or text messages about investment or pension opportunities.
Six in 10 (60%) consumers reported that they always or usually verify the authenticity of emails, messages or calls before providing personal or financial information.
Lisa Mckinnon-Lower, partner at law firm Spencer West LLP, commented: “The launch of the Firm Checker sounds to be an extremely positive and necessary step in strengthening consumer protection against fraud. In practice, once funds have been transferred, the legal and practical avenues for recovery are all too limited. I regularly advise clients who have fallen victim to professional-looking schemes only to find that tracing assets is extremely difficult and the cost of pursuing legal action is prohibitive. It is often difficult to encourage engagement by prosecution authorities for the same reason. This means that by the time advice is sought, the opportunities for meaningful intervention have often passed.
"Whilst the full details of the tool’s functionality are not yet clear, my primary concern is that those most frequently victimised by these scams are not always equipped to navigate digital verification systems, particularly when they are being pressured in real time by sophisticated fraudsters. Even where consumers do check authorisation, cloned firms and misleading permissions could continue to create confusion and a false sense of security.
"If designed well and used correctly, this tool could be extremely useful at tackling fraud, perhaps beyond the scope currently envisaged."
However, others were doubtful that the Checker will reduce consumer fraud, stating that in social engineering scams, fraudsters often use registered firms as decoys, before redirecting victims to different entities where these investment scams occur.
Jonathan Frost, director of global advisory for EMEA at BioCatch, said: “Uniting warnings with the register is a sensible step to improving transparency, but the FCA Firm Checker tool doesn’t fundamentally shift the dial.
“Fraud isn’t happening because consumers are choosing unregistered firms. It’s the registered firms themselves being weaponised as part of the social engineering journey. Victims are directed to them as a proof point, before being diverted to an entirely different entity to make an investment.
"Given that social engineering is predicated on circumventing controls, no search tool will meaningfully reduce fraud. The real answer lies in tackling the manipulation at its source, mainly on social media platforms, and disrupting the money mule networks that move the profits."
Michael Shand, managing principal at consultancy Capco, added: “The introduction of a Firm Checker to help consumers avoid falling victim to fraud is a welcome step by the FCA – however it is not a silver bullet. Fraud awareness must remain at the heart of the conversation, and while the checker has the potential to be a very valuable tool in providing customers with a trusted resource to verify the authenticity of firms, consumers still need to remain vigilant and combine this check with other protective behaviours.
“Consumers face an escalating threat from increasingly sophisticated scams; the risk applies to everyone but is particularly acute for vulnerable individuals. Here, the FCA plays a vital role, and the Firm Checker is an important piece of the puzzle. While the checker alone does not signal a fundamental shift in expectations around transparency or consumer protection, it does demonstrate the FCA's commitment to helping protect consumers from criminals. With clear, effective communications, it can be positioned as one tool within a broader fraud-prevention toolkit.
“However, tackling fraud inevitably requires a collective effort across government, law enforcement, technology companies, financial services firms, and consumers themselves.
“In supporting this focus on fighting financial crime, firms should continue to prioritise customer support and play an active role in educating and informing their customers. Where appropriate, signposting to the Firm Checker can complement broader engagement strategies. It is essential that firms communicate clearly and effectively with customers. The Firm Checker is one tool among many, and firms should help customers navigate other resources such as Action Fraud and their existing scam-checking services.”
