How to protect yourself from “clone firm” investment scams

According to Action Fraud, over £78 million was lost to ‘clone firm’ investment scams in 2020 with victims reporting average losses of just over £45,000.

What is a “clone firm” investment scam?

Clone firms imitate genuine investment firms to trick people into putting money into investments that don’t actually exist.

They use the name (or a name that is very similar to), address and reference number of a real, properly authorised, investment company.

These firms also send out sales material linking to the website of the legitimate company, tricking potential investors into thinking they’re dealing with the real thing.

Finally, they can be very sophisticated and hard to differentiate from the genuine business.

6 tips to protect yourself from “clone firm” scams

1. Beware of unrealistic returns

Deposit rates are currently at historically low levels (0-75-1.5% pa, depending on how long you are prepared to lock your money up for). 

This is one of the reasons that the number of people being caught by such scams is increasing, everyone is simply looking for a better return.

However, if you are being offered a significantly higher return than the norm, for a similar level of risk, then alarm bells should sound.

As the old adage goes, if it sounds too good to be true, it probably is.

2. Reject unsolicited investment offers whether made online, on social media or over the phone. 

3. If you are contacted by a company that you are not familiar with, always check that they are authorised.

You can do this by checking with the regulator in the country that the firm claims to be operating from.

In the UK, that would be the Financial Conduct Authority (FCA).

The FCA authorises almost all financial services companies in the UK. 

You can check the FCA Financial Services Register to see if a company or individual is authorised or registered with them. 

4. Check that the company contacting you is genuine

To make sure that you are being contacted by a genuine company and not one imitating the real thing, you should call their switchboard number which you can find on the FCA Register (or their regulator’s register if they are outside the UK). 

If they phone you, it’s usually best to end the call, check the register and then call the company back on the number found on the FCA website.

Remember, phone numbers displayed on incoming calls are easily spoofed by fraudsters to make it appear they’re calling from the expected location or company. 

If you don’t feel comfortable then it’s completely acceptable to stop, think and check before taking any action.

5. Check the FCA Warning List

Use the FCA Warning List to see if the company is known to be operating without the FCA’s permission.

Even if a firm isn’t on the FCA Warning List, it might still be a scam – scammers will change names and details all the time.

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

6. Consider seeking impartial advice before investing

Conclusion

For fraudsters, this is their job. These people are professionals. They have the time and expertise to try and build a relationship with you. 

They are extremely persistent and their aim is simple – to take your money. 


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