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FCA warns over rising scams as fake investment firms steal £78m

·4-min read
File photo dated 06/08/13 of a person using a laptop. Consumers reported more than �78 million of losses to investment and pension scams involving fraudsters imitating genuine firms in 2020. Issue date: Wednesday January 27, 2021.
Consumers reported more than £78m of losses to investment and pension scams involving fraudsters imitating genuine firms in 2020. Photo: PA

Over £78m ($106.5m) was stolen in “clone firm” investment scams in 2020, the Financial Conduct Authority (FCA) has revealed.

The FCA warned that this type of scam is growing in the UK, with the risks exacerbated by the coronavirus pandemic, with reports of clone firm scams increasing by 29% in April 2020 compared with March, when the UK went into its first lockdown.

Clone firms are fake companies created by fraudsters using the name, address and “Firm Reference Number” (FRN) of real companies authorised by the FCA. Once set up, the scammers then send sales materials linking to websites of real firms to scam potential investors into thinking they are the genuine company.

Brits reported average losses of £45,242 each on average in 2020 when investing with criminals imitating legitimate investment firms.

The FCA warned that “the ongoing financial impact of COVID-19 may also make people more susceptible to these types of clone scams.” Some 42% of investors said they are currently worried about their finances because of the coronavirus pandemic, and 77% have made or plan to make an investment within the next six months to help their financial situation, according to an FCA survey of over 1,000 investors.

Over three quarters (77%) admitted they did not know, or were unsure what a “clone investment firm” was and may not be able to spot a scam.

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The FCA advised 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 telephone number and website can be checked on the FCA Register.

Even though 2 in 5 (38%) investors said they would check the company’s FRN, this may not be enough, the FCA warned. Fraudsters will often copy FRN numbers and encourage potential victims to check the FCA Register to try to prove their legitimacy.

Mark Steward, executive director of Enforcement and Market Oversight, FCA, said: “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 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.”

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Gareth Shaw, Which? head of money, said: “People are losing life-changing sums of money every day to these highly sophisticated scams. They are being let down by tech firms that make it far too easy for fraudsters to hook in unsuspecting victims online and by the banks that leave their customers feeling abandoned when they refuse to reimburse them for devastating losses.

“The government must set out plans to hold the tech giants accountable for harmful scam content hosted on their platforms. It should also work with financial regulators to ensure the protections in the voluntary industry code on scams become mandatory and are strengthened, so that the vast majority of bank transfer scam victims know they will get their money back.”

How to protect yourself from clone investment firms

  1. Do not accept unsolicited investment offers whether made online, on social media or over the phone. Be cautious 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 stay away from.

  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.

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