£78 Million Lost In Clone Firm Investment Frauds

Coronavirus has created financial uncertainties for many, and some find it the most suitable time to sell such deals to anxious buyers. As a result, fraud cases increased significantly in 2020 compared to the year before. 

Such schemes use sophisticated technical knowledge to attract investors, and sometimes, it cannot be easy to spot it even for a knowledgeable investor.

Action Fraud, the FCA and the City of London Police issued new alerts related to cloning firm investment frauds where the reports discovered there had been an increase in the number of scams by 29 per cent in April 2020 as compared to March 2020 – when the government imposed the first Covid lockdown in the country. 

The Action Frauds numbers suggest investors lost over £78m from January to December, where the average loss made by each person was approx. £45K. The fraudsters used the method of duplicating the actual investment companies to trap the victims.

There are instances where the investors were asked to fill in contact details into reliable price matching websites, and they get a call from a scammer who pretended to be from a legitimate organisation. Some victims get links from legitimate websites to purchase items as they enter details; nevertheless, they are redirected to scam sites as they click or enter details. 

Some victims were offered high-yield bond fund opportunities, government or triple-A bonds, or other government-backed schemes or residential units like student accommodation or other sectors. 

One may even get offers into high-yield fixed-rate corporate bonds where you get the fake prospectus. The imposters' team members pretend to be associated with well-known domestic or international financial institutions.

The FCA and Action Fraud Advised investors to use contact details on the FCA Register to help people know the valid contact details to recognise fake calls or notifications. They explained how the financial impact of coronavirus could make people vulnerable to such clone scams. 

The data found that 42 per cent of the people were worried about the current economic conditions, and over 77 per cent were planning to invest (in some funds) in the next six months to improve their financial conditions. About 75 per cent of the investors said they were confident they could recognise a scam. 

However, the number of clone firm investment frauds grew by 29 per cent in the year 2020 in the UK, where 77 per cent of the investors were unaware of how a clone firm works.

What Is A Clone Firm?

A clone firm is a fake profile of a firm created by scammers using the name and address of an authentic firm. The fraudulent sites may represent the FRN (authorised by FCA). The gangs running the scheme may reach the victims in several ways. They often post their ads on social media or search engines. 

When the purchaser clicks the adverts, they are directed towards the replica of the original website of the real firm. Many sophisticated criminals may even clone the original site's domain name and other details. If the buyer registers their details on the clone website, they are contacted by the team members of the bogus firm.

The scammers use compelling literature and create mirror images of legitimate firms to encourage buyers. They assist the investors in examining the FRN of the institution on the FCA Register to prove involved buyers.

Anyone seeking such options should always visit the FCA website and ensure you enter an authorised contract. Check for all the details on the FCA website, and be cautious of the minor differences to avoid getting trapped into such options. 

The scammers may use the name of an employee of the real investment firm and create a copy of the legitimate organisation with their email address – that appears the same but may differ with subtle changes in the original.  

The investment management firms are working with the regulators to help trace organised criminals who steal the hard-earned money of unaware individuals through various planned strategies. Most such scams are based on sophisticated tricks where the tricksters adopt multiple disguises to get the saver's money. 

One may find the prospectus and other details attractive, offering huge economic benefits, but it can be misleading risky funds or false claims made by the firm. The returns such sites offer are sometimes slightly higher than market rates, and sometimes, they can be modest, so the client does not suspect. 

However, all investors should be cautious and know the risk factors involved in such deals, as the victims transfer the funds to the sites. They presume they are transferring to legitimate firms and may not realise it is a scam until they fail to get returns even after a long term. All inventors should be sceptical and vigilant before sending money into such schemes.