National Crime Agency warns novice and veteran traders alike of rise in clone company scams

January 27, 2021 TH Author

A warning has been issued by UK watchdogs of a rise in clone company scams targeting those looking for investment opportunities to recover financially from COVID-19.

On Wednesday, the UK’s National Crime Agency (NCA) and Financial Conduct Authority (FCA) issued an alert to the public concerning “clone company” scams which appear to be claiming not only novice investors but also veteran players in the market.

The FCA says that these forms of scams are on rise, with increased rates reported since the UK went into its first lockdown during March 2020.

In total, investors have lost over £78 million ($107m), a figure which is likely to continue to rise. Average losses are reported as £45,242 per victim, according to Action Fraud research.

Clone company investment scams go beyond typical phishing emails or dubious social media links promising an immediate return on your cash. Fraudsters use the same name, address, and Firm Reference Number (FRN) issued to authorized investment companies by the FCA and then during phishing, social media, and cold-call messages they send sales materials containing links to legitimate company websites.

However, the masquerade only goes so far: once trust is established, investors are hoodwinked into parting with funds intended for the legitimate company, only for their money to go straight into the coffers of scam artists.

It may not seem all that different from typical phishing campaigns, but this form of investment fraud technique is not as well-known as it should be. In an FCA survey, 75% of investors said they felt confident enough to spot a scam — but 77% did not know or were unsure of what a clone investment company was.

“A clone firm scam can target anyone, they are usually smart fraudsters who often present opportunities which look very tempting indeed,” commented Watchdog presenter Matt Allwright. “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.”

The NCA recommends that traders reject all unsolicited investment offers whether made online, through social media, or through the phone, and to check both the FCA Register and warning list — as well as any telephone numbers associated with entities — before signing up for financial products. It is also worth seeking independent advice before taking the plunge in a new investment opportunity.

Clone company scams that dupe even seasoned investors can be difficult to detect, but this is not the only form of financial fraud that has exploded online since the start of the pandemic.

Earlier this month, Interpol warned of a flurry of investment scams taking over dating applications. “Matches” work to obtain a potential victim’s trust and then begin to peddle a fake investment opportunity, encouraging them to join and promising to help them on their way to make a fortune.

Once the victim has parted with their cash, the match vanishes and they are locked out of their fake ‘investment’ account.

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