Attack of the clone firms: Over £78 Million Stolen In ‘Clone Firm’ Investment Scams

Action Fraud and the City of London Police are working with the Financial Conduct Authority (FCA) to issue a warning to the public, as reports of ‘clone firm’ investment scams increased by 29 percent in April 2020, compared to when the UK went into its first lockdown in March.

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

Across Derbyshire, since December 2019, 259 investment fraud offences have been recorded - resulting in a loss of £6.8m - £872,919 worth of these were due to clone firm scams. The highest age bracket most commonly affected by these scams are the over 50s, however, reports show that younger generations are now also becoming more vulnerable to fraudsters, who are targeting them through advertisements or posts on social media.

The ongoing financial impact of coronavirus may also make people more susceptible to these types of clone scams. 42% of investors say they are currently worried about their finances because of the pandemic, and over three quarters have, or plan to, make an investment within the next six months to help improve their financial situation.

💻 ‘Clone firm’ investment scams:

‘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.

Derbyshire Constabulary’s Fraud & Protect Officer, Tammy Barnes, said: “These types of investment scams are very sophisticated and can be hard to identify.

“Recently, in Derbyshire we have had three victims, who between them have lost over 750,000 by investing in cloned sites.

“With the coronavirus outbreak causing job losses and having a financial impact on incomes and our economy, more people are online looking for ways to make money. Sadly, these factors may leave victims more susceptible to fraudulent investment scams.

“Though these offences are getting more difficult to spot, there are some tell-tale signs to help protect your hard-earned money. If you’re considering an investment, be sure to visit the FCA Register and make sure the firm you’re dealing with is authorised and ensure to use the contact details provided by the FCA to verify the company, not the details that the firm may give you, fraudsters use copies of paperwork to appear more genuine manipulating contact details. Always double-check sites for any subtle differences to avoid ‘clone firm’ scams.”

❗ How to protect yourself

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 https://bit.ly/3qSQ4ZZ 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 https://bit.ly/1frO5QN or by calling 0300 123 2040.