27th January 2021

FCA issues ‘clone firm’ warning

With more than £78m stolen in ‘clone firm’ investment scams, the FCA is warning the public to protect themselves.

By JTS Staff
Journal of Trading Standards' in-house team
When considering your next investment, make sure you only ever use the details listed on the FCA Register
Clone investment scams can look real and sophisticated but anyone can spot them by following our advice

A surge in so-called ‘clone firm’ scams has prompted the Financial Conduct Authority (FCA) to issue a warning to the public.

A clone firm is an entity set up by fraudsters to imitate a genuine investment company. Action Fraud reported a 29% rise in the scams in April 2020 compared to March, when the UK went into its first COVID-19 lockdown.

Victims reported losses of £78m between January and December 2020, with an average loss of £45,242. The data has been released as part of the FCA’s ScamSmart campaign, alongside advice to help investors avoid fake firms and protect themselves.

Clone firms use the name, address and Firm Reference Number (FRN) of real companies authorised by the FCA. Fraudsters send sales materials linking to websites of legitimate firms to dupe potential investors.

Recent figures from survey company Censuswide suggest the ongoing financial impact of the COVID-19 crisis may make people more susceptible to the scams. Research found that 42% of investors are currently worried about their finances because of the pandemic and more than three quarters (77%) have made, or plan to make, an investment within the next six months to help improve their financial situation.

JTS columnist and Watchdog presenter Matt Allwright commented: “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 fine 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.”

Spread the word

The FCA is warning that even the most experienced investor could be at risk. According to Censuswide, 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.

Anyone considering an investment opportunity is advised to check the Warning List of firms, 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. 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.

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.”

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