A new warning about this worrying investment scam tactic has been issued today from Action Fraud, the City of London Police and the Financial Conduct Authority (FCA). In April last year, as the UK went into the first coronavirus lockdown, the number of “clone firm” investment scams being reported increased by 29 percent, compared to March.
On average, victims have been scammed out of more than £45,000 each, when investing with fraudsters who imitate genuine investment firms.
There was more than £78million of losses between January and December 2020, according to Action Fraud reporting data.
With the pandemic having a financial impact on households across the world, there’s concern the COVID-19 crisis may be making people more susceptible to these types of clone scams.
Research has found 42 percent of investors say they are currently worried about their finance because of the pandemic.
Furthermore, more than three quarters (77 percent) have, or plan to, make an investment within the next six months in an attempt to help improve their financial situation.
But, it’s not just novice investors who could be at risk – the most experiences investors may be facing the threat too.
The study found three quarters (75 percent) of investors said they felt confident they could spot a scam.
However, 77 percent admitted they did not know, or were unsure, what a ‘clone investment firm’ was.
“Clone firms” are set up by fraudsters, using the name, address and Firm Reference Number (FRN) of real companies which have been authorised by the FCA.
Adverts on social media platforms and search engines are often taken out by fraudsters, which victims can click on, taking them to exact replicas of websites belonging to genuine investment firms.
Even the website domain name can be cloned by the most sophisticated criminals.
Once the victims have registered their interest, they will be contacted by the fraudsters, who often obtain the names of genuine employees of investment firms and create seemingly legitimate company email addresses, but containing very subtle changes.
Having been duped, victims end up transferring their savings directly to criminal gangs, under the false belief that it is going to a legitimate investment firm.
It’s often not until months later that they realise the scam, when they fail to receive quarterly returns or investment reports.
It’s something which Janet, a finance officer from Chester, has sadly experienced.
She lost £40,000 to a clone investment firm, and said: “I’m quite savvy minded when it comes to money – being a finance officer I thought I was a confident investor and thought I knew how to spot the warning signs of a scam.
“After searching the internet for high-return bonds, I received a call the next day about investing in student accommodation.
“I found legitimate details of the company online – everything seemed genuine, so I invested.
“A few months later, after a couple more investments, I started to get a bit worried – I still hadn’t received confirmation of the latest investment. I tried to call the contacts I had been speaking to, but the numbers were invalid.
“It was clear I had been scammed. I had lost £40,000. I really thought I’d be able to spot a scam, but now I know they can be far more sophisticated than I had ever imagined.”
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 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 (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.”
Pauline Hawkes-Bunyan, Director of Business: Risk, Culture and Resilience at the Investment Association, said: “In a year clouded in 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 regulators to stop these scams, and is collaborating with our partners in Government to close them down and prevent them being advertised in the first place.
“These scams are sophisticated and cloaked in many different disguises. That is why we urge savers and investors to be as vigilant as possible to protect their savings and think carefully about the risks of fraud when making decisions about their money.”