Lord Carlile: ‘Unravelling the sinister link between advertising fraud and terrorism’

In the ever-evolving landscape of online advertising, a marketplace set to attract over £20bn of spending in the UK this year alone, a disquieting truth is emerging: a lack of regulation and transparency in the digital ad ecosystem is creating an environment ripe for fraud. While bleeding businesses of billions, it provides a shockingly vast funding stream for organised crime, extremism, and even terrorism. So why is our government turning a blind eye to it?

Brands used to know what they were getting when they bought ad spots on billboards, newspapers and commercials – self-evidently – as they could see, hear and touch them. Advertisers dealt directly with publishers, so they knew which human placed them and which humans might see them. But today, in a world of programmatic ad exchanges like Google Ads, the link to something tangible and traceable is broken. It has opened the floodgates to a myriad of criminal activity, from click and impression fraud to ad stacking, domain spoofing and bots; all of which deceive businesses into paying for valueless adverts that aren’t seen by real people – let alone potential customers.

The scale of the fraud is vast. According to Juniper Research, a staggering $84 billion in global ad spend is expected to be stolen in 2023, a number projected to skyrocket to $172 billion by 2028. To put that figure into perspective, the estimated global cost of ad fraud is double that of payment card fraud – an extraordinary loss which threatens the integrity of the entire online advertising industry. It poses an existential threat to traditional media too, still part of a healthy democracy – which are missing out on a significant source of revenue as they’re forced to compete with fraudsters.

But of greater concern is what you discover when you try to follow the money. While this whole area is murky by design, the US Department of Homeland Security has shown how this hugely lucrative revenue stream funds extremist groups who mean us harm. The World Federation of Advertisers says ad fraud is one of the biggest sources of income for organised crime – second only to the drugs trade. And a new report by Adalytics has exposed how legitimate brands are being unknowingly advertised on sanctioned websites, including those based in Iran and Russia, because of Google’s opaque automated ad placement system.

Digital advertising, once perceived as an exciting world of creativity and opportunity for brands and publishers alike, has become a haven for some of the world’s worst criminals seeking to exploit the financial returns and anonymity it offers. But we are very far from powerless to stop it.

During my time reviewing the UK’s efforts to tackle terrorism, great efforts were made to prevent money making its way to extremists here in the UK and abroad. We need that same concerted action now from both government and enforcement agencies.

The issue was barely mentioned in the Government’s Fraud Strategy earlier this year, and while the ongoing Online Advertising Programme is rightly concerned about preventing harmful content from being advertised online, we must also recognise that that it is the same bad actors behind both harmful and fraudulent ads. You cannot tackle the consumer harms caused by dangerous adverts without addressing rampant business-to-business fraud. Both are enabled by the opaque and largely unregulated nature of online advertising.

With figures from the National Crime Agency showing that 80% of all UK fraud takes place online, the need to bring transparency and accountability to the advertising ecosystem could not be more pressing.

Campaign groups such as UK Stop Ad Funded Crime (UKSAFC), which brings together a coalition of brands, advertisers and publishers, are pushing for industry-led action, but the sheer scale and sophistication of the criminal groups involved means the government must step up.

What we need, and urgently, are regulations to mandate enhanced checks on all advertising transactions to end the system of anonymity which has enabled criminals to insert themselves into the supply chain. But we must also make sure the police have the resources to bring the fraudsters to justice, with a dedicated team established in the new 400-strong National Fraud Squad.

The consequences extend beyond the digital landscape, impacting our society and our national security. Only through a collective effort can we hope to end the sinister convergence of ad fraud and the criminal activities it funds.

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