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'Clone firm' scams cost East Midlands investors £3million

The ongoing financial impact of Covid-19 is making people more susceptible to clone scams, according to the Financial Conduct Authority (FCA).

Action Fraud has reported a rise in 'clone firm' scams

More than £3 million was stolen from East Midlands investors last year as a result of 'clone firm' investment scams.


Fraudsters set up clone firms using the name, address and firm reference number (FRN) of real companies authorised by the regulator - the Financial Conduct Authority (FCA). They then send out sales materials linking to the websites of legitimate firms, to trick potential investors into thinking they are dealing with the real firm.


Losses can be high as fraudsters tend to encourage large or regular investments before disappearing with the money.


Nationally, there were losses of more than £78 million between January and December 2020, according to fraud reporting centre Action Fraud - with victims losing an average of £45,242.


In the East Midlands, investors reported losses in excess of £3 million:


Derbyshire - £872,919

Leicestershire - £600,002

Lincolnshire - £652,795

Northamptonshire - £454,357

Nottinghamshire - £489,396


Sadly, clone firm scams are just one example of investment fraud. Last year, 1,193 cases of investment fraud were reported to East Midlands Special Operations Unit (EMSOU) last year, with losses totalling £24.3m.


The sharp rise in clone firm investment scams is of particular concern. As such, Action Fraud, the City of London Police and the Financial Conduct Authority (FCA) have issued a warning to the public to be vigilant against such scams.


The criminal gangs running clone firm scams engage with victims in different ways, often taking out adverts on social media platforms and search engines. Victims will then click on these adverts and be taken to exact replicas of websites belonging to genuine investment firms.


The most sophisticated criminals will even clone the website domain name. Once victims have registered their interest, they’ll be contacted by the fraudsters, who often obtain the names of genuine employees of investment firms and create seemingly legitimate company email addresses, but with very subtle changes.

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There have also been instances of investors inputting their contact details into genuine price comparison websites and then being phoned by criminals purporting to be from a well-known, legitimate investment firm.


Another tactic used by these criminals to dupe investors is to send victims sales materials linking to websites of legitimate firms. The returns being promised 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.


In the end, victims will end up transferring their savings directly to criminal gangs, under the false belief that they are sending them to a legitimate investment firm. Often, victims will not realise that they’ve been scammed until months later, when they fail to receive quarterly returns or investment reports.


The ongoing financial impact of coronavirus may also make people more susceptible to these types of scams, with many investors saying they are currently worried about their finances and 77% planning to invest within the next six months to help improve their financial situation.


EMSOU’s Cyber Crime DCI Jonathan Blockley said:

“The coronavirus pandemic has led to financial uncertainty for many people – something criminals are quick to capitalise on.
“Investment fraud in general saw losses of more than £24 million from upwards of 1,000 reports in the region last year and this new trend for clone firms is particularly worrying as it is hard for people to spot a scam.
“Investing any amount of money comes with an element of risk and its important people take time to do their research by visiting www.fca.org.uk/scamsmart and seek independent impartial advice from an expert.
“Fraudsters use literature and websites that mirror those of legitimate firms. I cannot emphasise enough how important it is to double check every detail.”

Checking the company’s Firm Reference Number (FRN) isn’t enough, as criminals will often copy FRN numbers and encourage victims to check the number on the FCA Register to prove their legitimacy.


Anyone considering an investment opportunity should double-check all the details of a firm. Remember:

  • Reject unsolicited investment offers whether made online, on social media or over the phone. Be wary, even if you initiated contact.

  • Always check the FCA Register to make sure you’re dealing with an authorised firm and check the FCA Warning List of firms to avoid.

  • Only use the telephone number and email address on the FCA Register.

  • Consider seeking impartial advice before investing.


You can test if you can spot an investment scam from a smart investment by taking the Scam or Smart quiz, visit www.fca.org.uk/scamsmart to find out more.


If you think you’ve fallen victim to an investment fraud, report it to Action Fraud as soon as possible online at www.actionfraud.police.uk or by calling 0300 123 2040.


The contents of blog posts on this website are provided for general information only and are not intended to replace specific professional advice relevant to your situation. The intention of East Midlands Cyber Resilience Centre (EMCRC) is to encourage cyber resilience by raising issues and disseminating information on the experiences and initiatives of others. Articles on the website cannot by their nature be comprehensive and may not reflect most recent legislation, practice, or application to your circumstances. EMCRC provides affordable services and Trusted Partners if you need specific support. For specific questions please contact us by email.

 

EMCRC does not accept any responsibility for any loss which may arise from reliance on information or materials published on this blog. EMCRC is not responsible for the content of external internet sites that link to this site or which are linked from it.

The Cyber Resilience Centre for the East Midlands is set up to support and help protect businesses in the five counties against cyber crime. 

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