Do you know how to spot a scam?

You might think you've got enough experience to be able to spot an investment scam. But with new figures showing the scale of sophisticated 'clone firm' scams over the past year, it's worth arming yourself against the fraudsters.

Data from Action Fraud, the UK's national reporting centre for fraud and cyber crime, reveals losses of more than £78m between January and December 2020, with victims losing £45,242 each on average, when investing with fraudsters imitating genuine investment firms.

What's more, it's clear that fraudsters immediately sought to capitalise on the financial impact of coronavirus. Within one month of the UK first going into lockdown in March last year, reports of clone scams increased by as much as 29%.

Now, Action Fraud and the City of London Police have teamed up with the Financial Conduct Authority (FCA) to warn the public and explain how to avoid such scams.

What is a 'clone firm' investment scam?

'Clone firms' are set up by fraudsters using the name, address and Firm Reference Number (FRN) of real companies authorised by the FCA. They often run adverts on social media platforms and search engines.

After victims click on the ads they are taken to exact replicas of websites belonging to genuine investment firms. The most sophisticated criminals will even clone the website domain name, Action Fraud says.

Once victims have registered their interest they are 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.

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

The returns promised by these criminal gangs 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.

Victims end up transferring their savings directly to the fraudsters, under the false belief that they are sending them to a legitimate investment firm. And it can be some time before people realise they've been duped: often, victims don't become suspicious until months later, when they fail to receive quarterly returns or investment reports.

"Clone investment scams are sophisticated and extremely difficult to spot," said Mark Steward, executive director of Enforcement and Market Oversight at the FCA.

"If you're considering an investment, visit the FCA Register to make sure the firm you're dealing with is authorised. 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."

How to protect yourself

Action Fraud advises investors to:

1. Reject unsolicited investment offers whether made online, on social media or over the phone. Be wary even if you initiated contact.
2. 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.
3. Only use the telephone number and email address on the FCA Register, not the contact details the firm gives you, and look out for subtle differences.
4. Consider seeking impartial advice before investing.

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.

Fidelius is authorised and regulated by the FCA and our FCA reference number is 188615.