Savers lose £78m to ‘clone firm’ investment scams in 2020

Savers lose £78m to ‘clone firm’ investment scams in 2020

Fraudsters pretending to be legitimate firms stole £78m from unsuspecting victims through pension and investment scams in 2020, according to Action Fraud.

Data published by Action Fraud this morning (January 26), as part of the regulator’s ScamSmart campaign, showed that in 2020 individuals reported average losses of £45,242 when investing with fraudsters imitating genuine investment firms.

Reports of clone firms increased 29 per cent in April 2020 compared to March as fraudsters looked to take advantage of uncertainty created by the Covid-19 pandemic.

Article continues after advert

According to the Financial Conduct Authority, the risk of savers being duped by criminals is likely to increase as financial vulnerability rises amid the pandemic.

It found that two-fifths (42 per cent) of investors said they were worried about their finances because of the pandemic and over three quarters (77 per cent) planned to make an investment within the next six months to help improve their financial situation.

Scammers operate by setting up clone firms using the name, address and firm reference number (FRN) of real companies authorised by the FCA.

They then send out sales materials linking to the websites of legitimate firms, to trick potential investors into thinking they are dealing with the real firm.

To thwart the scammers, the FCA and Action Fraud have urged savers to check the regulator’s warning list of firms and individuals that it knows are operating without its authorisation.

In addition, the specific details of a firm, such as the telephone number and website address can be verified on the FCA register, so people can be sure they are dealing with the real firm.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “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 and National Cyber Security Centre to take down clone sites when they are discovered.”

He said if people were still unsure about a firm after checking the FCA’s website, they should call the consumer helpline for further information. 

Mr Stewart added: “When it comes to clones, I cannot emphasise enough how important it is to double check every detail.”

Tom Selby, senior analyst at AJ Bell, said it came as no surprise that fraudsters have ramped up attempts to steal people’s savings during this pandemic.

Mr Selby said: “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.”

Meanwhile, Andrew Tully, technical director at Canada Life, said these types of scams do not only hit victims financially but can also be detrimental to people’s mental health.