New warning from Action Fraud, the City of London Police and the Financial Conduct Authority (FCA).
- Number of ‘clone firm’ investment scams reported increased by 29% as UK went into first lockdown
- Victims scammed out of more than £45,000 each, on average
- 77% of investors do not know or are unsure what a ‘clone investment firm’ is
- FCA and Action Fraud advise investors to only use contact details on the FCA Register to help avoid ‘clone firm’ scams
What is a ‘clone firm’ investment scam?
‘Clone 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. Once victims have registered their interest,
they’ll be contacted by the fraudsters, who often obtain the names of
genuine employees of investment firms and create seemingly legitimate
company email 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 phoned by
criminals purporting to be from a well-known, 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 slightly better than the market rate,
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 are sending them to a
legitimate investment firm. Often, victims will not realise that
they’ve been scammed until months later, when they fail to receive
quarterly returns or investment reports.
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 - something which criminals will feel no
remorse about capitalising on. We have sadly 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.
"This new trend of 'clone 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 its important 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, FCA, said:
“Clone investment scams are sophisticated and extremely difficult to spot. Last year we received over 3767 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 (FRN) on the FCA Register to sound as convincing as possible.
“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 our FCA Register, not the details the firm gives you, and
check for subtle differences to avoid ‘clone firm’ scams. And if you’re
still unsure, call our consumer helpline for further information. When
it comes to clones, I cannot emphasise enough how important it is to
double check every detail.”
How to protect yourself
Even though two in five (38%)3 investors said they
would check the company’s Firm Reference Number (FRN), checking this
alone isn’t enough. Criminals carrying out ‘clone firm’ investment scams
will often copy FRN numbers and encourage victims to check the number
on the FCA Register to prove their legitimacy.
Anyone considering an investment opportunity should double-check all the
details of a firm, not just the FRN, on the FCA register. This includes
the telephone number and it is important you only use the number on the
FCA Register to make contact with the firm.
Remember,
1.Reject unsolicited investment offers whether made online, on social media or over the phone. Be wary even if you initiated contact.
2. Always check the FCA Register to make sure you’re dealing with an authorised firm and check the FCA Warning List of firms to avoid.
3. Only use the telephone number and email address on the FCA Register, not the contact details the firm gives you and look out for subtle differences.
4. Consider seeking impartial advice before investing.
Investors can test if they can spot an investment scam from a smart investment by taking the Scam or Smart quiz, visit www.fca.org.uk/scamsmart to find out more.
If you think you’ve fallen victim to an investment fraud, report it to Action Fraud as soon as possible online at www.actionfraud.police.uk or by calling 0300 123 2040.
