The proliferation of online scams has reached alarming levels, with consumers in the European Union losing €4.3 billion to digital fraudsters in 2022 alone. This issue is exacerbated by sophisticated tactics such as AI-generated deepfakes impersonating prominent figures like Elon Musk or financial experts. These deceptive advertisements often circulate on social media platforms, which inadvertently profit from hosting them. While mechanisms exist to reimburse victims, primarily through banking systems, the broader impact extends beyond monetary losses—it erodes public trust in legitimate information sources and financial institutions. The challenge lies in effectively removing fraudulent content, a task likened to playing "whack-a-mole" due to its persistent nature.
As the Financial Times recently discovered, combating deepfake ads requires relentless effort. Ads falsely portraying columnist Martin Wolf promoting fraudulent investments were widely viewed before being removed, with new ones quickly emerging from alternate accounts. Meta's inability to swiftly address this issue highlights the need for more stringent measures. Prevention, rather than reactive solutions, should be prioritized to stop these schemes at their source.
To tackle this growing menace, the EU is contemplating legislation that would impose legal responsibilities on social media platforms. Under discussion are proposals requiring automatic reimbursement for scam victims from financial service providers like PayPal, Visa, and Mastercard. An amendment proposed by Ireland’s finance ministry, gaining support across EU capitals, goes further by mandating online platforms to verify advertisers' regulatory authorization for selling financial services, blocking those who fail to meet standards. However, concerns persist regarding potential conflicts with the EU's Digital Services Act, which exempts platforms from extensive content monitoring.
Despite these reservations, verifying advertiser legitimacy does not equate to broad-based monitoring but instead focuses on large-scale platforms and search engines. Some companies, such as Google and Meta, have already implemented or committed to similar practices. For instance, Google operates a financial services certification program in 17 countries, while Meta agreed with the UK's Financial Conduct Authority to prohibit unregistered firms from posting financial ads. The EU must prioritize robust consumer protection over appeasing powerful tech lobbyists.
A legal obligation for platforms to authenticate financial advertisers addresses only part of the problem, leaving unresolved issues like celebrity deepfakes used in product endorsements. Nevertheless, requiring registration for financial product sellers offers a viable solution to curtail harmful online fraud. By setting an example, both the EU and the UK can pave the way for global jurisdictions to adopt similar measures, ensuring safer digital environments for all users.