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£78m lost to fake investment firms in 2020

Written by: Emma Lunn
The Financial Conduct Authority (FCA) has issued a warning to the public about so-called ‘clone firm’ investment scams.

Clone scammers pretending to be legitimate financial firms stole £78m from unsuspecting victims in 2020, according to Action Fraud.

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.

According to Action Fraud, during 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, alongside advice to help investors avoid fake firms and protect their hard-earned cash.

The FCA warns that the ongoing financial impact of coronavirus may make people more susceptible to these types of clone scams. Four in 10 (42%) of investors say they are currently worried about their finances because of the pandemic, and more than three quarters (77%) have or plan to make an investment within the next six months to help improve their financial situation.

However, the FCA highlights that 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.

Tom Selby, senior analyst at AJ Bell, 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.

“That means familiarising yourself with the tell-tale signs of fraud, rejecting any investment offers made out of the blue, only dealing with legitimate, bona fide organisations, checking to make sure the firm you are in contact with are who they claim to be, and ideally seeking regulated advice.”

Gareth Shaw, head of money at Which?, 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.”

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