Attack of the clone firms: over £78 million stolen in ‘clone’ firm investment scams

New warnings have been issued from Action Fraud, the City of London Police and the Financial Conduct Authority (FCA) as reports of ‘clone firm’ investment scams increase.

The ongoing financial impact of coronavirus may also make people more susceptible to these types of clone scams. Forty two percent of investors say they are currently worried about their finances because of the pandemic, and over three quarters (77%) have, 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 did not know, or were unsure, what a ‘clone investment firm’ was.

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.

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.

How to protect yourself
  • Reject unsolicited investment offers whether made online, on social media or over the phone. Be wary even if you initiated contact.
  • 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.
  • 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.
  • 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 believe you are the victim of a fraud, please report this to Action Fraud as soon as possible by calling 0300 123 2040 or visiting www.actionfraud.police.uk.

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