The number of investors that have been lured into putting money in ‘clone firms’ that appear to be genuine investment outfits is on the up, according to new research.

Investment fraud victims lost an average of £45,000 after being tricked into investing in fake investment firms, said Action Fraud, the UK’s national reporting centre for fraud and cybercrime.

More than £78mln was lost in investment frauds across the whole of 2020, the research found.

This included a 29% rise in clone firm investment scams in April compared to March, when the UK first went into lockdown, with Action Fraud suggesting the ongoing financial impact of coronavirus may make people more susceptible to these types of clone scams.

Hard to spot scams

Such is the skill of these criminals, “even the most experienced investor could be at risk,” the organisation said, with 77% of investors surveyed admitting they would not know what to look for to identify a clone investment firm.

Superintendent Sanjay Andersen, from the City of London Police’s National Fraud Intelligence Bureau, said: “This new trend of ‘clone firms’ is particularly worrying as it makes it harder for people to spot a scam.”

He said there had been a spike in reports in the summer, after the first national lockdown was lifted, while the Financial Conduct Authority said it received 3,767 reports of clone scams to its consumer helpline.

The National Fraud Intelligence Bureau recommends people “take time to do their research”, visiting and seeking independent impartial advice from an expert.

“If you think you’ve already invested into a fraudulent scheme, report it to Action Fraud,” he said.

Online platform Interactive Investor said it recent retirement survey of over 12,000 adults, revealed 13% of respondents have fallen victim to financial scams, with older investors more at risk, with 18% in the 72-77 age category and 20% of those aged over 77 having been defrauded.

Women are less likely to have experienced a financial scam than men, the survey found, at 9% versus 15%, while over a third of men admitted to having been the victim of investment fraud compared to just over a fifth of women.

In addition, while 42% of women and 43% of men said they got their money back, 17% of women said it had put them off attempting to put their financial affairs in order, for fear of being scammed again, compared to 9% among men.

“Financial scams tend to be indiscriminate in their targeting, and while we all have to be on our guard, the risks seem to increase with age, said Myron Jobson at Interactive Investor.

“Men might be more susceptible to investment fraud because, on average at least, they tend to invest more. Whatever the reason, it is important to take care with your money and look out for the warning signs.”

Call for tighter online laws 

PIMFA, the body that represents the wealth management and financial advice companies, said frauds are likely to continue unless there are changes made to hold online platforms to account.

“Website cloning of legitimate financial services firms and other forms of online fraud are becoming more prevalent, and are something we have been warning about for some time,” said Liz Field, chief executive of PIMFA.

She said: “It is a cause of deep frustration to our members and the Regulator that they can do little more themselves to combat these criminals and prevent harm from being perpetuated, than report such frauds to internet service providers (ISPs), domain name registration services and online platforms.”

She said one way such frauds could be prevented would be for the government to include economic harm within its upcoming online safety bill, which might require online platforms, ISPs and registrars to take swifter action against fraudsters, or take preventative action to stop fraudsters reaching their victims in the first place.

How to spot a clone firm

Fraudsters use literature and websites that mirror those of legitimate firms and encourage investors to check the Firm Reference Number (FRN) on the FCA Register to sound as convincing as possible.

If you’re considering an investment, Mark Steward of the FCA, said not only should you visit the FCA register to make sure the firm you’re dealing with is authorised, but also use the contact details on the FCA register, not the details the firm provided, as well as checking for subtle differences.

“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.”

Action Fraud also recommended rejecting all unsolicited investment offers, whether made online, on social media or over the phone.

“Be wary even if you initiated contact.”

Jobson said tell-tale scam signs included cold calling relating to pensions, as this has been banned since 2019.

“No reputable pensions firm would call you out of the blue to suggest you transfer your retirement nest egg to a better deal. When in doubt, simply hang up,” he said.

“Also beware of things that signal illegitimacy. If the firm doesn’t allow you to call back, it is most likely because it is a fraudulent enterprise. Also beware of firms that only list mobile phone numbers or a PO box address on their website.

“Fraudsters may try to tempt you in by offering free pension reviews. Don’t fall for it. It could be a trick to get you to share personal information.”

If it sounds too good to be true, it usually is, he added.

“There is no such thing as a free lunch when it comes to your finances. If you come across a proposition that promises ridiculous returns and downplays risk, it probably is too good to be true.

“Before you commit to any offers, make sure you do extensive independent research on the company and make sure you check all the information yourself – don’t just take their word for it. There are no shortcuts when it comes to financial management, but help is available. The government’s free and impartial pension wise service is a good first port of call, offering guidance on options for those with a defined contribution pension.”

Case study

Janet, a finance officer from Chester who spoke to Action Fraud, lost £40,000 to a clone investment firm.

Talking about her experience, she 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.”

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