The UK Government is planning to extend the current ban on cold calling related to pensions to cover all financial products, due to the high level of financial scams in the country.
The introduction of the ban on pension cold calling in 2019 aimed to eradicate the devastating impact of pension scams, which resulted in people being swindled out of their life savings. According to Action Fraud, the average victim of pension fraud lost a staggering £75,000.
Despite efforts to raise public awareness, fraud still accounts for approximately 40% of all crimes in the UK and costs an estimated £7bn per year. As a crucial source of funding for organised crime, the need to combat financial scams has never been greater. KIS Finance has investigated whether the proposed legislation will make a significant impact or if the scam industry has become too entrenched to defeat easily.
Rebuilding public confidence in the finance sector
The fear of falling prey to scams is eroding the public’s trust in the finance sector, prompting the Government to take action to address the issue. The plan is to tackle the root cause of the problem by banning cold calling on all financial products, including insurance and cryptocurrency, thereby making it harder for scammers to contact potential victims.
With the implementation of this ban, individuals can be confident that any unsolicited call regarding a financial product is a scam, as legitimate financial companies do not engage in such illegal practices.
Despite the convincing nature of scammers, the best course of action for anyone receiving a cold call is to immediately hang up and report the matter.
Why are scammers so convincing?
A major obstacle in combating scams is the convincing nature of those who perpetrate these crimes, which can be partly attributed to the origins of the scam industry in India.
In the early 2000s, there was a significant rise in overseas call centers for banks, building societies, and insurance companies, which invested heavily in technology and customer service training for their large teams in India. However, as the market shifted away from using overseas centers, scammers took advantage of the skills that were left behind. With high levels of unemployment and associated poverty, scammers found the market was ripe for exploitation.
With over 37 million people in India currently looking for work and unemployment at around 10%, it is not surprising that scammers can recruit the numbers they need to operate on a large scale. The lack of job options for young and educated people has enabled scammers to establish a strong and highly profitable industry, which they are unlikely to abandon anytime soon.
What other steps are being taken to tackle scammers?
As people have become more knowledgeable about scams, scammers have become increasingly sophisticated in their attempts to deceive people into believing they are dealing with a legitimate company.
To combat this, the Government is partnering with Ofcom to crack down on “spoofing,” where scammers use legitimate UK phone numbers to trick people into believing they are speaking with a UK-based company. However, this is challenging because scammers can be located thousands of miles away, outside the jurisdiction of the UK police.
The Government’s proposed measures also include banning “SIM farms,” which fraudsters use to send scam messages to thousands of people simultaneously.
To improve public confidence that the issue of scams is being effectively addressed, the current Action Fraud service is being replaced by the National Fraud Squad. This new unit will hire 400 specialists who will focus on cracking down on those who commit these offenses. However, it is unlikely to have much impact on the significant number of scams that originate abroad.
It is worth noting that 96% of crimes reported to Action Fraud are closed without a successful outcome, raising doubts about whether the National Fraud Squad will have any greater success in deterring scammers.
Will the new legislation make a difference?
While the new regulations may provide some assistance, the key to success will be increasing public awareness so that anyone contacted via phone or text immediately recognizes the call as illegitimate. However, scammers have historically relied on finding new methods to defraud people, and with 41 million UK adults receiving suspicious calls and texts last summer alone, there is a risk that they will still be able to prey on vulnerable individuals.
Given that, a large portion of the scam industry is based abroad and thus beyond the scope of UK law, it is questionable whether the new legislation will make a significant difference in reducing the number of individuals who fall victim to the ever-evolving world of scams.
Phoebe Griffits, fraud expert at KIS Finance says: “Raising public awareness is the key to defeating the scammers. Despite all the efforts to date, the problem still persists as people continue to fall for the scammers’ stories and lies.
If the Government wants the new legislation to really make a difference, they need to invest in a large-scale public awareness campaign, to reinforce the message that if you receive a cold call in relation to your finances it’s a scam – no matter how convincing they sound!
It’s often the elderly who are prime targets for the scammers, so any information campaign needs to think about how this group receive their news. On-line information is not enough. Public information on TV and radio will be key to reaching this demographic and reinforcing the message that they should always hang up the phone if they receive this type of call.
Potentially trusted organisations, such as Age UK, could support an information campaign to help get the message out to the most vulnerable. Ironically, it could even be that a telemarketing campaign could be an effective way to reach those who would entertain a sales phone call.
If people are concerned about a call that they have received, they should ring their bank or the relevant body direct, using the telephone number provided on their bank card or on other paperwork that they have received. Never call back on a number provided by the caller as this will all be part of the scam.
Those with elderly or vulnerable relatives would do well to help protect them by reinforcing this message and advising their relative to speak to them if they are concerned over any calls that they have received.
It will only be by actively working to raise awareness and reducing their success rates, that we will be able to stamp out the scammers and stop them in their tracks “
