Fraud expert warns FCA Firm Checker will not stop scams
The Financial Conduct Authority's new Firm Checker tool is unlikely to reduce fraud levels despite improving visibility of authorised firms, according to Jonathan Frost, Director of Global Advisory for EMEA at BioCatch and former leader of the UK's National Fraud and Cybercrime Reporting system.
The regulatory watchdog has positioned its service as a way for individuals to verify whether a financial firm is authorised before engaging with investment or other financial products. However, experts warn the tool may be inadequate against sophisticated modern scams that exploit legitimate firms as part of their deception tactics.
Background and Context
The FCA's Firm Checker represents the regulator's latest attempt to empower consumers with tools to verify financial services providers. The service allows users to search whether a firm holds the correct regulatory permissions, addressing concerns about unauthorised operators targeting vulnerable investors. Yet this approach comes as UK fraud losses continue to rise, with investment scams and impersonation fraud causing billions in damages annually.
The tool's launch reflects a growing trend of regulatory bodies shifting some responsibility for fraud prevention onto consumers through verification systems. This strategy assumes that informed consumers can better protect themselves when provided with accessible information about regulated entities.
Key Figures and Entities
Jonathan Frost brings particular weight to this debate, having previously led development of the UK's National Fraud and Cybercrime Reporting system at the City of London Police. His career spans both law enforcement and industry collaboration initiatives, including projects for the Foreign, Commonwealth and Development Office and the Home Office. Frost also served as Director of Technical Collaborations at Stop Scams UK, working with companies including Meta, Google and BT on anti-fraud efforts.
BioCatch, where Frost currently serves as Director of Global Advisory for EMEA, specialises in behavioural biometrics and fraud prevention technology. The company works with financial institutions globally to detect and prevent various forms of financial crime.
Legal and Financial Mechanisms
Modern investment scams increasingly operate through sophisticated social engineering techniques that bypass traditional verification systems. Rather than simply presenting themselves as unregulated entities, criminals build credibility by directing victims to verify legitimate firms through official registers, then diverting investments to entirely different entities outside the regulated system.
"Fraud isn't happening because consumers are choosing unregistered firms. It's the registered firms themselves being weaponised as part of the social engineering journey," Frost explains. "Victims are directed to them as a proof point, before being diverted to an entirely different entity to make an investment."
These "clone firm" schemes create particular challenges for regulators, as criminals mimic the names and registration details of legitimate companies while ultimately funneling funds through uncontrolled channels. The deception often involves lookalike websites, forged documentation, and carefully constructed narratives that leverage the apparent credibility of regulated institutions.
International Implications and Policy Response
Frost's criticism highlights a fundamental debate in fraud prevention: whether consumer education tools or systemic interventions offer better protection against financial crime. While verification systems like the FCA Firm Checker may address certain types of fraud, they do not tackle the social media platforms and money mule networks that facilitate most investment scams.
The UK's Online Safety Act introduces new duties for large platforms around illegal content, which includes certain types of fraud. However, financial services firms argue that enforcement and practical implementation will determine the actual impact on scam volumes. Law enforcement bodies and campaign groups continue to call for stricter requirements on online platforms that host financial promotions or user-generated content, along with faster removal of scam content and stronger verification of advertisers.
Simultaneously, banks and payments providers are investing in analytics and monitoring systems to detect money mule activity and suspicious transfers. Industry initiatives encourage data sharing between firms and with law enforcement to identify mule networks and repeat patterns of fraudulent behaviour. These complementary approaches suggest that consumer verification tools will form part of a broader ecosystem rather than serving as standalone solutions to complex fraud challenges.
Sources
This report draws on expert commentary from Jonathan Frost, Director of Global Advisory for EMEA at BioCatch and former leader of the UK's National Fraud and Cybercrime Reporting system, along with publicly available information about the FCA's regulatory approaches and UK fraud prevention initiatives.
