There was a 29% jump in investment scams involving clone firms during the UK’s first lockdown in April, national fraud and cyber crime reporting centre Action Fraud revealed.
On average, savers were conned out of £45,242 each; with the total hitting £78m ($107m, €88m) for the whole of 2020.
Fraudsters found fertile grounds as people became more susceptible to these types of scams due to the ongoing financial impact of the pandemic, Action Fraud said.
Three-quarters (77%) of investors are worried about their finances because of covid-19, and they either have or plan to make an investment within the next six months to mitigate their financial situations.
As a result, they become more likely to fall for clone firms presenting themselves as legitimate investment companies.
While 75% feel confident they could spot a scam, 77% didn’t know what a clone investment firm was.
‘Increasingly popular tactic’
Tom Selby, senior analyst at AJ Bell, said: “It is sadly no surprise mendacious fraudsters have ramped up attempts to swindle hard-working people out of their savings during this pandemic.
“Cloning appears to be an increasingly popular tactic among scammers. The appeal of this model to fraudsters is obvious – regulated firms and particularly well-known brands are trusted by their customers, which will likely mean potential victims are less wary when dealing with someone pretending to be that firm.
“While important work has been done by the government, regulators and the pensions industry to tackle fraud, it is ultimately down to individuals to be vigilant and protect themselves from financial disaster.
“The golden rule should be that, if you are in any doubt about whether or not the firm you are dealing with is legitimate, do not part with your hard-earned savings.”
Fraud ‘epidemic’
Debbie Barton, financial crime prevention expert at Quilter, added: “Retail investors face an investment scam epidemic. The internet, search engines and social media sites are awash with dubious investment propositions purporting to offer high returns, with little or no risk, often using a clone of a well-known financial services firm to give investors a false sense of security.
“The lockdowns have accelerated the proliferation of clone firm investment scams. On one side of the coin, you have a group of people who have built up their savings and will be looking to generate a decent return in an environment where leaving your savings in cash will earn you a pittance.
“On the other side, many others will have experienced a hit to their incomes, and will be trying to achieve the best return possible on their savings.
“But this certainly does not mean that once lockdown restrictions are lifted, the threat of clone firm scammers will simply disappear.
“Quilter’s recent analysis of the FCA’s warning list shows that clone firm warnings were on the rise even before the pandemic, increasing by 41% between 2017 and 2018, and a further 35% between 2018 and 2019.
“Over the course of the decade, clone firm warnings have skyrocketed by over 600%, so this is not just a pandemic problem.”
‘Check every detail’
Mark Steward, executive director of enforcement and market oversight at the Financial Conduct Authority (FCA), said the regulator received nearly 4,000 reports of clone scams in 2020, and that criminals are making it that much harder to spot them.
“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.
“If you’re considering an investment, visit the FCA Register to make sure the firm you’re dealing with is authorised.
“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,” Steward added.
