Interactive Investor

Victims lose £78 million to Covid-19 scammers

27th January 2021 13:09

Laura Miller from interactive investor

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Scammers take £45,000 in the average attack, police find.

More than £78 million has been stolen in ‘clone firm’ scams – with savers and investors losing £45,000 each – as fraudsters exploit the Covid-19 pandemic.

City watchdog the Financial Conduct Authority (FCA) is issuing a warning to the public after a sudden rise in reports about clone firms.

These reports are about fraudsters pretending to be a legitimate firm to steal savers’ cash, often creating identical looking websites, texts and emails.

Action Fraud data shows this type of investment scam increased by almost a third in April 2020 compared to March, when the UK went into its first lockdown.

Consumers reported losses of more than £78 million to Action Fraud between January and December 2020, at an average loss of £45,242 each.

The ongoing financial impact of coronavirus may make people more susceptible to these types of clone scams, the FCA warned.

Four in 10 investors say they are currently worried about their finances because of the pandemic. More than three quarters (77%) have, or plan to make, an investment within the next six months to help improve their financial situation.

Three-quarters 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.

The FCA gave the example of Janet from Chester, who lost £40,000 to a clone investment firm. She said: “I’m quite savvy when it comes to money – being a finance officer I thought I was a confident investor and thought I knew how to spot the warning signs of a scam.”

After searching the internet for high-return bonds, Jane received a call the next day about investing in student accommodation. She found legitimate details of the company online, saying which reassured her, so she invested.

“A few months later, after a couple more investments, I started to get a bit worried,” Jane said. “I still hadn’t received confirmation of the latest investment. I tried to call the contacts I had been speaking to, but the numbers were invalid. It was clear I had been scammed. I had lost £40,000. Now I know they can be far more sophisticated than I had ever imagined.”

Clone firms are set up by scammers using 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 into thinking they are the real firm when they are not.

The FCA is advising anyone considering an investment opportunity to check its warning list of firms, which is updated daily, and not to deal with a firm it does not authorise. 

A real firm’s telephone number and website address can be verified on the FCA register. Consumers should use the phone number on the register to make contact to be sure they are dealing with the real firm.

Two in five investors said they would check the company’s FRN, but this alone is not enough. Scammers will often copy FRN numbers and encourage victims to check the FCA register to prove their legitimacy.

Matt Allwright, consumer champion and presenter of Watchdog, said: “It is more important than ever to tune into the fine print, spot the bear traps 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.”

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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