Home>Security Matters>Security Matters>“£78 million-plus stolen in ‘clone’ firm investment scams” reports Action Fraud

“£78 million-plus stolen in ‘clone’ firm investment scams” reports Action Fraud

04 February 2021

ACTION FRAUD and the City of London Police are working with the Financial Conduct Authority (FCA) on issuing a warning alert in the wake of reports of ‘clone firm’ investment scams increasing by 29% in April last year compared to March, when the UK went into its first full lockdown.

Action Fraud’s reporting data reveals losses of more than £78 million between January and December 2020, with victims losing £45,242 each on average as a result of investing with fraudsters imitating genuine investment firms.

The ongoing financial impact of the Coronavirus may also make people more susceptible to these types of clone scams. On that note, 42% of investors have stated that they’re currently worried about their finances because of the pandemic, while over three-quarters (77%) have made, or plan to make an investment within the next six months to help improve their financial situation.

However, even the most experienced investor could be at risk. Three-quarters (75%) of investors said they felt confident they could spot a scam. However, 77% admitted they didn’t know, or were otherwise unsure, what a ‘clone investment firm’ really looks like and what it entails. In essence, ‘clone investment firms’ are set up by fraudsters using the name, address and Firm Reference Number (FRN) of real companies authorised by the FCA.

The criminal gangs running these scams can engage with victims through a number of channels. Often, they will take out adverts on social media platforms and search engines. Victims will then click on these adverts and be taken to exact replicas of websites belonging to genuine investment firms. The most sophisticated criminals will even clone the website domain name.

Seemingly legitimate

Once victims have registered their interest, they’ll then be contacted by the fraudsters, who often obtain the names of genuine employees of investment firms and create seemingly legitimate company e-mail addresses, but with very subtle changes.

There have also been instances of investors inputting their contact details into genuine price comparison websites and then being telephoned by criminals purporting to be from a well-known and legitimate investment firm. Another tactic used by these criminals to dupe investors is to send victims sales materials linking to websites of legitimate firms.

The returns being promised by these criminal gangs are often modest so as not to arouse suspicion, but they’re invariably slightly better than the market rate, and therefore appealing to those looking for long-term ‘safe’ investments.

In the end, victims will end up transferring their savings directly to criminal gangs under the false belief that they’re sending them to a legitimate investment business. Often, victims will not realise that they’ve been scammed until months later when they fail to receive quarterly returns or investment reports.

Financial worry and uncertainty

Superintendent Sanjay Andersen from the City of London Police’s National Fraud Intelligence Bureau said: “The Coronavirus pandemic has caused many people to feel financial worry and uncertainty. This is something which criminals will feel no remorse about capitalising on. Sadly, we’ve seen an increase in the number of investment fraud reports in 2020 compared to the previous year, with a spike in reports in the summer after the first national lockdown was lifted.”

Andersen continued: “This new trend of ‘clone investment firms’ is particularly worrying as it makes it harder for people to spot a scam. Investing any amount of money comes with an element of risk and it’s important that people take time to do their research by visiting www.fca.org.uk/scamsmart and seek independent impartial advice from an expert. If you think you’ve already invested into a fraudulent scheme, report it to Action Fraud.”

Mark Steward, executive director of enforcement and market oversight at the FCA, explained: “Clone investment firm scams are sophisticated and extremely difficult to spot. Last year, we received over 3,767 reports of clone scams to our Consumer Helpline. Fraudsters use literature and websites that mirror those of legitimate firms, as well as encouraging investors to check the Firm Reference Number on the FCA’s Register to make themselves sound as convincing as possible.”

Further, Steward advised: “If you’re considering an investment, visit the FCA Register to make sure the firm you’re dealing with is authorised. Use the contact details on the FCA Register, not the details the firm gives you, and check for subtle differences to avoid ‘clone investment firm’ scams. If you’re still unsure, call our Consumer Helpline for further information. When it comes to clones, it cannot be emphasised enough how important it is to double-check every detail.”

Opportunity in misfortune

Pauline Hawkes-Bunyan, director of business risk, culture and resilience at the Investment Association, outlined: “In a year clouded by uncertainty, organised criminals have sought opportunity in misfortune by attempting to con the public out of their hard-earned savings. The investment management industry is working closely with the police and the regulators to stop these scams. We’re collaborating with our partners in Government to close them down and prevent them being advertised in the first place.”

Hawkes-Bunyan concluded: “These scams are sophisticated and cloaked in many different disguises. That’s why we urge savers and investors to be as vigilant as possible in order to protect their savings and think carefully about the risks of fraud when making decisions about their hard-earned money.”