FCA issues warning over ‘clone firm’ investment scams

The FCA is issuing 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 reveals consumers reported losses of more than £78 million between January-December 2020. Throughout 2020, consumers reported average losses of £45,242 each on average when investing with fraudsters imitating genuine investment firms. The data has been released as part of the FCA’s ScamSmart campaign[1], alongside advice to help investors avoid fake firms and protect their hard-earned cash.

The ongoing financial impact of coronavirus (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.

However, the FCA highlights even the most experienced investor could 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[2], 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[3]. 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.

Even though 2 in 5 (38%) investors said they would check the company’s Firm Reference Number (FRN), checking this alone isn’t enough. Scammers will often copy FRN numbers and encourage victims to check the FCA Register 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 (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.'

Janet from Chester, who lost £40,000 to a clone investment firm 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.'

Consumer champion and presenter of Watchdog, Matt Allwright, 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 beartraps 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.'

Graeme Biggar, Director General of the National Economic Crime Centre said: 'The National Economic Crime Centre (NECC) and partners including the City of London Police, Serious Fraud Office and Financial Conduct Authority are working with the National Cyber Security Centre (NCSC) to tackle the fraudulent and cloned websites behind investment fraud schemes. Consumers should be wary of investment websites that may appear genuine and I would ask anyone who is thinking of investing their money to check the contact details on FCA’s Financial Services Register first, or contact the FCA’s consumer helpline for advice.  In one specific initiative targeting FCA-identified fake firms and cloned websites, we worked with the NCSC to remove over 90 cloned websites, plus 134 UK scam phone lines and 105 associated email addresses. 

'Alongside our partners, the NECC is building an intelligence picture of organised criminals who are using cloned websites and fake comparison sites to carry out investment fraud. We will use every tool at our disposal to track down, disrupt and prosecute those responsible for this criminal activity.'

How to protect yourself from clone investment firms

1. Reject unsolicited investment offers whether made online, on social media or over the phone. Be wary even if you initiated contact.
2. Always check the FCA Register[4] to make sure you’re dealing with an authorised firm and check the FCA Warning List[5] of firms to avoid.
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.

Investors can test if they can spot an investment scam from a smart investment by taking the Scam or Smart quiz, visit fca.org.uk/scamsmart[1] to find out more.

Notes to editors

1. 29% and £78 million figures used in second paragraph are from Action Fraud data relating to cloned company fraud identified amongst investment and pensions fraud reports submitted between January-December 2020.
2. 42% and 77% figures used in third paragraph are from Censuswide. 1,003 UK respondents who invest (actively invest in stocks, shares, bonds or other investment products) aged 50+. Fieldwork was undertaken between 31/12/2020 – 05/01/2021. The survey was carried out online. 
3. 75% and 77% figures used in fourth paragraph, and 33% figure used in sixth paragraph are from Censuswide. 1,003 UK respondents who invest (actively invest in stocks, shares, bonds or other investment products) aged 50+. Fieldwork was undertaken between 17/02/2020-19/02/2020. The survey was carried out online.