Dating sites and social media platforms are on PSR watchlist

Dating websites and social media platforms are under scrutiny as “originators” of fraud, according to the UK Payment Systems Regulator (PSR), which was presenting evidence to the House of Lords on February 12 of the “many” steps it is taking towards fraud prevention .

It follows the implementation in October of the regulatorʼs authorised push payment (APP) reimbursement policies. These protect victims by requiring banking service providers to reimburse customers who fall victim to APP fraud, while freezing any suspected transactions for four working days.

David Geale, PSR interim managing director, was questioned about the regulatorʼs “limited role” in intervening in the “multibillion-pound” worldwide fraud industry, particularly its solutions to romance fraud among the UK youth population.

Social media platforms have become a conduit for criminal activity in recent years, ranging from image-based exploitation and blackmail to sex trafficking. According to YouGov data, social media platforms in the UK (except for Facebook) are dominated by users aged between 18-24 years old with YouTube (81%), Instagram (78%), and Snapchat (60%) as three most popular platforms.

Trade body UK Financeʼs Annual Fraud Report 2024 shows that “romance scam payments increased by 31% in 2023 and are up 200% from 2020”. A romance scam is when a scammer develops a romantic relationship with a victim for financial gain. They have been around for centuries but dating apps and social media have enabled them to flourish.

According to Geale, “data” was crucial. He reported that through collaboration with banks and payments providers, PSR had identified several origination points of fraud. For example, social media giant Meta which owns Facebook, WhatsApp and Instagram, originates 58% of total APP fraud in the UK, according to their collective data.

Moral hazard

However, the Lords also raised concerns whether, with the APP reimbursement policy, regulators were putting “too much pressure” on the banks to shoulder all the responsibility for fraud cases. “We’re worried that it [reimbursement] illuminates potential moral hazard that it reduces the incentive for individuals to take responsibility for their own situations,” said Lord Vaux of Harrowden.

While the PSR acknowledged that victims of romance fraud are often given “repeated” warnings not to transfer funds by their banks, it said the responsibility for processing fraudulent transactions remained with the banks.

Awareness campaign

Other countries are also publicising the risk of romance fraud. In the US, the Dating or Defrauding? social media awareness campaign was launched on February 10, highlighting instances that involve cryptocurrency, gift cards, wire transfers and other forms of payment.  

The Commodity Futures Trading Commission’s Office of Customer Education and Outreach (OCEO), along with non-profit organisations, is also providing information on how to recognise relationship investment scams, what to do if affected, and the importance of sharing information to warn others.

“Valentine’s Day and the following weeks provide an excellent opportunity to remind people that criminals are using social media, dating, and messaging apps to scam Americans,” said OCEO director Melanie Devoe in a statement.