The Financial Conduct Authority (FCA) has recently issued a warning to the public as reports of ‘clone firm’ investment scams increased by 29% in April 2020 compared to March, when the UK went into its first lockdown.
Action Fraud data has revealed that consumers reported losses of more than £78 million between January and December 2020.
Throughout that 12-month period, consumers reported average losses of £45,242. The data has been released as part of the FCA’s ScamSmart campaign, paired with advice to help investors avoid fake firms and protect their money.
The ongoing financial impact of COVID-19 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 (77%) have or plan to make an investment within the next 6 months to help improve their financial situation.
What is even more alarming is that the FCA have found experienced investors to also 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.
Clone firms are fake firms set up by scammers using the name, address and ‘Firm Reference Number’ (FRN) of real companies authorised by the FCA. Once set up, these fraudsters will then send sales materials linking to websites of legitimate firms to dupe potential investors into thinking they are the real firm when they are not.
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.
Mark Steward, Executive Director of Enforcement and Market Oversight, FCA, remarked: “Clone investment scams can look real and sophisticated but anyone can spot them by following our advice.
“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.’
To read the full press release, click here.