Ad fraud on social media a “systemic problem”, says report

Fraudulent ads peddling counterfeits on social media platforms is a systemic and growing problem that requires urgent action, says a new report covering 70 top international brands.

The Transnational Alliance to Combat Illicit Trade (TRACIT) and American Apparel and Footwear Association (AAFA) have co-published the report, which paints a damning picture of social networking platforms like Facebook and Instagram and websites like YouTube and Google.

“In keeping pace with consumer trends – and to stay one step ahead of controls – illicit traders now post fraudulent adverts that divert unsuspecting consumers to websites featuring counterfeits, fake services, and other fraud,” says the report.

The fraudulent ads also seem to be extremely well targeted to consumers based on their interests, location, demographics or browsing history, it adds. In addition to fake and shoddy goods, there is a trend towards advertising of fraudulent commercial and financial services, sometimes using names and images of personalities without their consent.

For buyers, there are health and safety as well as financial and data security risks, and there is growing evidence that organised criminal networks may be behind the ads.

“It’s alarming that people are exposed to fraudulent advertisements for counterfeits while they’re thumbing through their social media accounts,” according to TRACIT director general Jeffrey Hardy.

“The ads are so professional that they easily deceive consumers into thinking they’re getting a great deal. Instead, they’re being diverted to a rogue website that was built specifically to sell and distribute counterfeits – and they’re just not expecting that.”

One company’s experience

The findings tie in with the experience of one UK-based start-up firm who explained to the challenges it faces trying to get ads that steal copyrighted images of its products and offer them for sale at a knockdown price via social media ads.

Needless to say, consumers who purchase the goods via the links in the ads generally receive either nothing at all, or are sent something that bears no relation to the promised item.

A spokesperson for the company – which doesn’t want to be identified – tells us: “Facebook and Instagram are useless. All you can do is report the ads but after doing that you get a generic reply stating ‘Facebook will now show you better suited ads’.”

They add: “The ads are the driving force of the scams so to shut those down as soon as they pop up on [Facebook and Instagram] would be the best defence but it doesn’t seem like that’s an option. I think Facebook is happy taking the advertising money from the scammers.”

The start-up says it has had better luck with other platforms like Shopify, which has a takedown form that seems to work fairly promptly. There’s a problem there too however – Shopify staff are only in the office during working hours on a weekday.

“The scammers know this and plan their scam launches accordingly,” it adds. “Our weekends are now completely jam-packed with trying to get these sites down and replying to people who got scammed trying to convince them that it’s not our fault.”

What can be done?

A key driver for this type of fraudulent activity is the lack of policies and procedures to verify an advertiser’s true identity, and limited vetting during the onboarding process, says the report.

Requiring social media companies to require advertisers to identify and vet advertisers before they can put fraudulent ads online “is a solution of the highest priority,” says the report.

That’s something that has also been out forward as a way to curb listings for counterfeit and otherwise fraudulent products put on by third-party sellers on e-commerce websites.

Earlier this month, Amazon said that from September 1 sellers will be unable to operate anonymously, stipulating that a business or individual will have to have their name and address published on its sites.

“Similar verifications should be required for online advertisers, including the disclosure of certain verified information regarding sellers, such as identity, principal place of business, contact information, verified bank account information, government-issued photo identification, and a business tax identification number,” says the TRACIT/AAFA report.

It also calls for a more rigorous review of an advertisement prior to publication, both algorithmically but also manually where high risk has been flagged, as well as for the establishment of an e-business license for advertisers, ideally linked to a central repository.

“The social networking platforms are some of the most popular and most valuable brands in the world,” says Hardy. “It’s absolutely inconsistent with today’s standards of corporate social responsibility to expose users to such easy forms of fraud.”

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