In clamping down on fraudulent advertising, the Online Safety Act fails to address ad fraud 

In clamping down on fraudulent advertising, the Online Safety Act fails to address ad fraud 

The Online Safety Act is only scratching the surface of a far bigger issue, one that contributes to a massive loss to the UK economy and risks our national security.

While the Online Safety Act tackles the issue of fraudulent ads, the more significant problem of ad fraud, especially in the programmatic supply chain, is noticeably absent — and we’re all worse off for it.

Yes, it is important to crack down on fraudulent ads those that promote products that will never be delivered, are illegal or aren’t approved for sale in the UK. After all, a government’s mandate, first and foremost, is to protect consumers.

But these just equate to advertising scams — they’re not ad fraud as the industry knows it or, more specifically, sophisticated money laundering on a mass scale. Even though the advertising industry fed into the consultation process and highlighted the impact of ad fraud, it was largely ignored in the Act.

So why? Well, it boils down to a misunderstanding of the issue by Government and regulatory bodies, partly due to the highly fragmented and complicated nature of the programmatic advertising supply chain. Focus was placed on where it’s most visible — preventing consumers from being defrauded by ads for fake products, financial scams, or ads that lead to phishing attempts. Meanwhile, ad fraud, which disproportionately affects brands and commercial players in the ad ecosystem, is seen as an industry issue because consumers aren’t directly impacted.

And while it’s hard to blame those involved in drafting the legislation (who are, after all, not ad tech experts) this lack of understanding of ad fraud at the regulatory level, never mind any appreciation of the scale of the problem, is hampering the industry’s efforts to address it. 

Taking a leaf out of the finance sector

While the Act addresses harmful content that primarily affects social media, the major platforms already have a multitude of processes in place to remove that kind of material. But when it comes to programmatic, processes for preventing fraud in a meaningful way are missing.

Perpetrators of sophisticated ad fraud — often organised criminal gangs or foreign fringe states — are getting away with it due to a lack of identity checks, a lack of traceability, and easy access.

Instead, with almost as much money flowing through the ecosystem as financial products, programmatic needs a bank-grade identity verification process, alongside anti-money laundering checks, for anyone wanting to participate in the advertising ecosystem. The banking system’s Know Your Customer standard is explicitly designed to protect financial institutions against fraud, corruption, money laundering and financing terrorism. As things stand, however,  it’s very different in our world.

Bad actors can easily set up and plug into the major advertising networks with minimal vetting, and it’s very straightforward for these fraudsters to set themselves up anonymously using offshore bank accounts. Sites that directly spoof legitimate ones can be launched and start earning money without anyone knowing who is really behind them.

Looking at the vast sums of money involved here, it’s plain to see why this can’t be allowed to continue. Digital advertising accounts for a significant part of the UK’s GDP, contributing £129 billion in 2022 while supporting two million jobs.

Yet there’s little in the way of a fundamental regulatory framework determining what brands, agencies, DSPs, SSPs, and all the constituent parts of the industry should be doing to prevent fraudsters from entering the supply chain. There are more checks when you look to open a bank account to prove who you are than when setting up and participating in digital advertising. And the implications are huge. 

National security is at stake

The financial aspect is one element, with British brands and ad tech companies continuing to lose a lot of money — a cost they in turn may indirectly pass on to consumers — but the real issue is where this money goes. It’s being lost to criminal organisations to fund drug dealing, corruption, and terrorism, or in the most sinister cases, perpetrated by foreign adversaries seeking to undermine Western democracies and fund disinformation.

This is why ad fraud must be taken seriously at a government, law enforcement, and regulatory level. It’s not only the massive loss to the UK economy which is at stake, but also the serious national security implications of this high-value, low-risk fraud. Yet little is being done legally, and there have been few prosecutions to date.

While government input is essential, the industry also has it in its power to take action, especially at the agency level. When onboarding and approving publishers, agencies must tighten up on identity checks, so they know who is entering the programmatic ecosystem and plugging into networks before allowing them to participate in the supply chain. Taking this step will make a noticeable difference. 

The Online Safety Act shows the ongoing need to educate regulators, decision-makers and key stakeholders so they recognise the magnitude of ad fraud. And while tackling fraudulent ads is essential, it’s only scratching the surface of a far bigger issue. As an industry, fighting ad fraud and calling for a clearer regulatory environment is a long-standing effort, and it’s frustrating to see regulation pass which fails to address the broader issue — both a major oversight and a lost opportunity.

Elliot Hill is chief marketing officer of VeraViews, a blockchain-powered advertising ecosystem.

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