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UK government to water down fraud proposals for tech groups

UK ministers are poised to water down proposals to force tech companies to pay compensation to victims of online financial scams, after concerns at the Treasury and the Department for Science, Innovation and Technology about their impact on the sector.

The government is set to announce a new national fraud strategy as early as Wednesday. It is meant to provide a co-ordinated approach between the government, law enforcement and the private sector.

But ministers are now expected to announce a voluntary agreement, with the tech industry pledging to take a more proactive approach to combating online fraud rather than making companies responsible for compensation.

Prime Minister Rishi Sunak said last November that the government would publish its fraud strategy “shortly”. But according to people with knowledge of the situation it was delayed owing to concerns inside the government over earlier proposals.

The online safety bill moving through the House of Lords will impose a “duty of care” on large platforms to protect users from fraud and other negative content.

Ministers were proposing to go further and make the tech and telecoms sector responsible for reimbursing victims of fraudulent content, removing the “safe harbour” principle in which platforms are not liable for content on their sites until they are aware of it.

But there were fears that could open the doors to a wave of people suing tech companies for the material they host.

Officials at the newly formed science department — which is now responsible for regulating the tech sector — expressed concern about the financial implications for tech companies.

One official said it was important to balance safety with pro-growth policies, adding that it was possible to tackle online fraud without financially harming the sector.

The Treasury also privately expressed concern that the proposals could leave the sector open to large numbers of content-related lawsuits.

That could leave companies forced to monitor all content to determine whether it was fraudulent, which one government official described as “extremely burdensome to do at scale”. The official added: “It would move the UK away from our international competitors and would harm our international tech competitiveness.”

People familiar with the negotiations said that as part of the launch of the strategy, tech companies would make pledges about the actions they would take to reduce fraud. These would include changes to the design of their platforms to make it easier to spot and report fraudulent content.

They are already scanning images and tracking and blocking IP addresses of scammers and using machine learning to detect fraudulent behaviour.

Some large tech companies, such as Meta and Microsoft, have already committed to a “revised advertising onboarding process” ensuring that UK financial services companies that want to advertise with them have been approved by the Financial Conduct Authority, which regulates financial services. More tech companies are expected to sign up to this next week.

Lenders are presently part of a voluntary agreement to improve the amount refunded to victims of authorised push payment fraud, although the rates vary widely. One, TSB, has pledged since 2019 to refund any of its more than 5mn customers who have been victims of online fraud.

UK Finance, the financial services trade body, has pushed for the tech industry to take greater responsibility for online fraud. “The majority of APP [authorised push payment] fraud originates in other sectors, particularly online platforms, which is why they must take far greater action to help stop criminals from stealing people’s money.”

The Treasury declined to comment. The Home Office said the government was “absolutely committed to cracking down on fraud”.

The fraud strategy will also allocate resources for police forces to tackle fraud, emphasise the need to empower the public to spot scams, and detail how the government will spend the £400mn it has committed to spend over three years to help deal with the problem.

Additional reporting by Kate Beioley

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