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Gloucestershire Constabulary is sharing a Financial Conduct Authority (FCA) warning to the public as reports of ‘clone firm’ investment scams increased by 29% in April 2020 when the UK first went into national lockdown.
Action Fraud data shows that consumers reported losses of more than £78 million between January and December 2020 with this being an average of £45,242 when investing with fraudsters imitating genuine investment firms.
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.
The ongoing financial impact of Covid-19 may make people more susceptible to these types of clone scams and tips to prevent yourself from being targeted can be found below:
The FCA is advising anyone considering an investment opportunity to check the Warning List of firms, which is updated daily, and not to deal with a firm that is not authorised by the FCA.
The specific details of a firm, such as the telephone number and website address can be verified on the FCA Register (register.fca.org.uk). The FCA also warns consumers to use the phone number on the FCA Register to make contact with an FCA authorised firm so as to be sure they are dealing with the real firm.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said: "Clone investment scams can look real and sophisticated but anyone can spot them by following our advice.at
"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. Last year we issued alerts in relation to over 1,100 firms including clones, which has more than doubled since 2019 and we are working with the National Economic Crime Centre (NECC) and National Cyber Security Centre to take down clone sites when they are discovered.”
"If you’re considering an investment, visit the FCA Register to make sure the firm you’re dealing with is authorised. Check our Warning List of firms you should avoid, 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."
Matt Allwright, consumer champion and presenter of BBC One's Watchdog, said: "It may seem appealing - particularly right now - to make some investments to boost your savings or income. However, it is more important than ever to tune into the finer print, spot the bear traps and triple check details before parting with your money.
"A clone firm scam can target anyone, they are usually smart fraudsters who often present opportunities which look very tempting indeed. When considering your next investment, make sure you only ever use the details listed on the FCA Register, and think about getting impartial advice before going ahead."
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.
More information from the Financial Conduct Authority can be found here: https://www.fca.org.uk/news/press-releases/fca-scamsmart-warning-clone-firm-investment-scams
If you think you’ve fallen victim to an investment fraud, report it to Action Fraud as soon as possible by calling 0300 123 2040.