Article by Phil
It’s that time of year when the Financial Ombudsman Service (FOS) provides an update on the number and types of complaints it has received in the last quarter. Sadly, the headline news is that complaints about scams and fraud are up by two thirds on last year. Just over 5,000 year to date compared to 3,000 for the same period last year. These are part of the 50,000 + complain that FOS deals with each year.
So, although worrying it represents about 10% of the overall.
For the first time in a few years the most complaints were received about bank current accounts, with almost 7,000 complaints, which is 50% up on last year. For the last few years, the number one complaints have been about PPI, but this is now almost over. Within the complaints 50% were still about scams and fraud. All despite the numerous initiatives from government and the social media companies to try to prevent fraud.
Although numbers are up, the number of complaints about pension advice were less than 700, just about 1% or 1 in 100 of the complaints received. There were, however, almost the same number of complaints about SIPP’s.
But the new kid on the block is cryptocurrency. Although not regulated or covered the FOS service, for the first time they have reported on the number of complaints received about cryptocurrencies. These complaints are mainly related to banks accounts not protecting consumers from crypto scams and losses often coming through online advertising and scams. FOF provided no exact numbers but the fact that it reported on the complaints is telling.
The FCA continues to struggle with how to introduce regulation for cryptocurrencies, although it appears that the government is urging some form of regulation.
There are a number of issues of concern. Price volatility and the difficulty of valuing the “assets”. As well as the links to organised crime and difficulty in preventing money laundering are all serious concerns. But difficult to regulate.
With 2.3 million in the UK owning cryptocurrencies the FCA feels it needs to be involved. Of those, 12% think that there is some protection offered by the FSCS (there isn’t), and 15% of buyers are using credit to buy the currency – again a real cause for concern.
One area of regulation that is expected is to bring cryptocurrencies into the scope of the financial promotion’s regulations. That way it will be difficult for them to be “legally” advertised online.
But many commentators think the market is too difficult to regulate and that the FCA should focus on education about the risks instead. After all, how do you regulate a broker like Binnacle, which is registered in the Cayman Islands but claims to have a virtual office and no physical presence?
Then there is also the issue of taxation, which is concerning the government. Currently, cryptocurrency gains are subject to Capital Gains Tax and the crypto assets are deemed to be held in the individuals place of residence (despite them being held online). But there is the potential for gains to be taxed as income if they are being made through regular trading which is being look at.
Better to speak to a Certified Financial Planner first.
Now we’ve just learned that HMRC is about to act in this regard. So called “Nudge” letters will be sent out to taxpayers reminding them to declare their crypto holdings and “gains” to HMRC. It seems they believe that many consumers believe that crypto trading is outside or beyond HMRC’s remit (in that they can’t be traced), but it seems that the HMRC have been working with crypto traders to identify individuals.
So, some people might be in for a surprise.
From our perspective this is just another reason why crypto needs regulating. We shouldn’t have a multi-million trading market in the UK where customers believe that any profits aren’t taxable. That’s not fair on the rest of the economy is it?
