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HM Treasury Proposes Cold-Calling Ban to Prevent Investment Scams

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His Majesty’s (HM) Treasury has proposed a cold-calling ban for all United Kingdom consumer financial products and services. According to the consultation paper, the interdiction would extend existing legislation that restricts unsolicited direct marketing. The proposed measures seek to disrupt widespread fraud by preventing cold-calling scams. While legitimate businesses also use the practice, the paper considers the overall impact to be detrimental.

Rising Fraud in the UK Creates Regulatory Challenges

In extending current cold-calling restrictions, HM Treasury seeks to close loopholes that might serve as a foil for fraudsters posing as legitimate firms. The measures aim to respond to rising fraud rates in the UK, particularly investment fraud. According to the proposal, fraud accounts for 41 percent of crime in Wales and England, with nearly 4 million cases occurring in 2022. Between 2018 and 2023, investment fraud multiplied by five – from 4,000 reports to 24,000 and £748 million lost.

The policy’s full scope will not be finalized until the consultation responses have been received. However, the draft impact assessment lists several key objectives, including:

  • Enabling enforcement action against firms that do not observe the ban.
  • Empowering consumers to disconnect and report unsolicited calls for financial products and services.
  • Removing ambiguity in current legislation, which could confuse consumers and empower fraudsters. 

The consultation and impact assessment will determine the proposed measures’ effectiveness and how they might impact legitimate businesses. It offers four options for consideration: 

  1. Do nothing. Under this option, no legislative changes would be made, but this doesn’t meet the government’s anti-fraud objectives.
  2. Outright ban. This is the option the government currently prefers and is hoping to implement. It would do the most to close loopholes and simplify existing measures.
  3. Ban with some exemptions. All financial products and services would still fall under the ban. However, customers that had previously provided contact information and hadn’t opted out could still be contacted.
  4. Narrower ban. The measures would only be extended to a specific range of products and services.

In the consultation paper, the Treasury said it also plans to implement campaigns to raise public awareness about the ban. These would inform consumers that unsolicited calls about financial services are against the law and likely to be fraudulent.

What Firms Can Do

According to the consultation paper, the government does not believe the interdiction will negatively impact most legitimate business models that follow good marketing practices.

Still, firms affected by the ban may choose to revise their current marketing policies. Firms may also want to contribute to the consultation before it closes on September 27, 2023. This will help ensure the legislation reflects legitimate industry practices, risks, and needs.

It is also essential for firms to assess the effectiveness of their current fraud prevention programs. Proactive risk management is the best way to stay abreast of regulatory requirements and protect customers. Firms can ask:

  • Is fraud risk included in regularly-updated enterprise-wide risk assessments? This is especially important as the UK considers implementing a new “failure to prevent fraud” offense.
  • Does the current fraud program respond to the firm’s unique risks, including investment fraud risks?
  • What measures are being taken to educate customers to enable them to be proactive in resisting scam attempts? 
  • Do current risk prevention measures move beyond siloes to consider the whole financial crime ecosystem? The link between fraud, money laundering, terrorist financing, and predicate offenses such as environmental crime and human trafficking is becoming increasingly apparent. Proactive firms approach financial crime risk holistically rather than segregating risk data and processes.

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Originally published 11 August 2023, updated 11 August 2023

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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