Action Fraud has joined with City of London Police and the Financial Conduct Authority (FCA) to warn investors about ‘clone firms’ after fraudsters made away with more than £78m using the scam in 2020.

These ‘clone firms’ are set up using the name, address and ‘Firm Reference Number’ (FRN) of real companies authorised by the FCA, often leaving victims unaware that they have been the victim of a crime until they fail to receive returns or investment reports.

The returns being promised by these criminal gangs are often modest so as not to arouse suspicion, but slightly better than the market rate, therefore appealing to those looking for long-term, ‘safe’ investments.

Action Fraud said victims were scammed out of an average of more than £45,000 each when investing with fraudsters imitating genuine investment firms and noted that the number of ‘clone firm’ investment scams had increased by 29 per cent in the UK’s first month of lockdown alone.

Despite the fact that three-quarters (75 per cent) of investors said they felt confident they could spot a scam, a higher proportion (77 per cent) did not know or were unsure what a ‘clone investment firm’ was.

Action Fraud warned that investors were more vulnerable than usual at the moment due to concerns about finances due to the pandemic, with almost half (42 per cent) citing this as a worry, while over three-quarters (77 per cent) said they planned to make an investment within the next six months to help improve their financial situation.

FCA executive director of enforcement and market oversight, added: “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.”

AJ Bell senior analyst, Tom Selby, commented: “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.”

Canada Life technical director, Andrew Tully, said: “While falling prey to scams hits victims financially, there are also quite severe hidden costs to mental health as people’s ability to trust is shattered overnight.

“Despite the public message campaigns and the ban on cold-calling, the scammers are either simply ignoring the law or looking to sophisticated campaigns over social media in order to con people out of their savings.”

Speaking to the Work and Pension Committee in a session pension scams, Pensions Minister, Guy Opperman, said: "There is no question that the allowance of effectively taking money for fraudulent organisations on your website, in circumstances where there is, it seems very limited assessment of that organisation before it is allowed on the website, with the consequential damage that is done to all of our constituents by people then thinking that they’re going to Prudential, Legal and General, Aviva or whoever it is, is massive.

"I read the evidence from Aviva, which went to the next degree as they were paying money to persuade google to take down sites and actually advertise their own site, and we’ve reached the situation where the number one provider of information is not a newspaper or an encyclopaedia, it’s Google, and to a lesser extent Facebook.

"We as legislators need to take a very long hard look at how it is we are going to regulate online operators on an ongoing basis. I have very strong views that what is going on, and Google and Facebook are allowing to happen is absolutely unacceptable”.

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