EU may tighten regulations on deceitful online advertisements by compelling digital platforms to verify they're transacting with trustworthy entities.
In an effort to effectively tackle the growing issue of online investment scams and fraudulent advertisements, the European Union is considering targeted modifications to its Digital Services Act (DSA). These changes aim to enhance platform responsibility, transparency, and user protection, building upon the DSA’s existing framework.
The DSA, initially designed to prevent illegal and harmful activities online, including fraud and scams, currently relies on the vast majority of general users to report fraudulent adverts. However, many users may not be aware they are being served such adverts.
One proposed solution is to strengthen content moderation and risk assessment specific to financial scams. Platforms would be required to implement specialized risk assessments for investment scams and fraudulent ads, similar to current mandates for hate speech and content harmful to minors. This would include tailored detection mechanisms to identify and promptly remove such content while balancing freedom of expression.
Another key proposal is to mandate greater transparency of advertising content. The DSA already requires platforms to publish comprehensive repositories of all ads served. This could be further enhanced by requiring platforms to provide verified information about the advertisers’ identities and the financial legitimacy of advertised products and services, helping users and authorities spot and report scams more easily.
Improvements in user notification and flagging tools are also being considered. Platforms should develop more accessible and effective mechanisms that empower users to flag suspicious investment offers or fraudulent ads, ensuring rapid platform response and removal. Enhanced feedback loops would also support better data collection for regulators and researchers analysing scam trends.
Stricter accountability and independent auditing are also on the table. In addition to the current obligation for external audits of platform compliance, there could be dedicated audits focusing on the handling of financial scams and fraudulent advertisements. These audits would verify the effectiveness of platforms’ mitigation measures and impose penalties if platforms fail to act diligently.
The EU is also considering enhancing cooperation with financial regulatory authorities. The DSA could be modified to formalize cooperation channels between online platforms and national financial regulators or consumer protection agencies. Timely sharing of information on fraudulent patterns would assist in quicker detection and enforcement actions.
Lastly, a focus on vulnerable groups, including minors, is proposed. Given existing DSA provisions to protect minors from harmful targeted advertising, similar protections could be extended to protect all users from manipulative financial ads that exploit cognitive biases or knowledge gaps, reducing the risk of scam victimization.
These modifications would build on the DSA’s current strengths in risk management, transparency, and user empowerment, thereby making the online environment safer against investment scams and fraudulent advertisements. Such a targeted approach balances enforcement with innovation and user rights, addressing gaps in the existing framework while leveraging lessons from related EU legislation like the Digital Markets Act.
[1] European Commission. (2020). Proposal for a Regulation of the European Parliament and of the Council on a framework for the evaluation, supervision and authorisation of online intermediation services in the Internal Market (Digital Services Act). https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12528-Digital-Services-Act-DSA [4] European Commission. (2020). Proposal for a Regulation of the European Parliament and of the Council on contests in the digital sector (Digital Markets Act). https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12432-Digital-Markets-Act-DMA
- To further combat financial scams and fraudulent investing activities, the European Union's Digital Services Act (DSA) proposal suggests enforcing specialized risk assessments on investment scams, similar to current measures for hate speech and harmful content.
- In the pursuit of increased transparency, the DSA could also mandate platforms to provide verified information about advertisers’ identities and the financial legitimacy of the products and services they offer, aiding users and authorities in spotting potential scams more easily.
