Consumers Warned of $100m Clone Firm Scams

British consumers lost nearly £80m ($109m) to so-called “clone firm” scams last year, as pandemic-related money woes persuaded many to make ill-judged investments, according to the Financial Conduct Authority (FCA).

The financial regulator reported consumers losing an average of £45,242 each when interacting with fraudsters masquerading as legitimate investment companies. Reports surged 29% between March, when the country went into its first lockdown, and April 2020.

As the name suggests, clone firms are fake entities set up by fraudsters who use the name, address and Firm Reference Number (FRN) of legitimate FCA-regulated companies.

Scam emails spammed out to consumers will link to the real companies’ websites to add legitimacy, and the fraudsters often copy FRN numbers and encourage victims to check the FCA Register to prove they are the real deal.

Three-quarters (75%) of investors told the FCA they felt confident they could spot a scam, although even more (77%) admitted they did not know, or were unsure, what a “clone investment firm” was.

The regulator urged anyone considering investing to check the firm’s details with the FCA Register and to use the phone number listed there to double-check any information.

The COVID-19 crisis is making scams like these increasingly profitable for cyber-criminals. The FCA revealed that 42% of investors are currently worried about their finances because of the pandemic, and 77% have already or plan to make an investment within the next six months to boost their finances.

“Last year we issued alerts in relation to over 1100 firms including clones, which has more than doubled since 2019, and we are working with the National Economic Crime Center (NECC) and National Cyber Security Center to take down clone sites when they are discovered,” explained Mark Steward, the FCA’s executive director of enforcement and market oversight.

“If you’re considering an investment, visit the FCA Register to make sure the firm you’re dealing with is authorized. When it comes to clones, I cannot emphasize enough how important it is to double check every detail.”

A report from thinktank RUSI this week warned that fraud has become a serious threat to the UK’s national security and called for a “major systemic shift” in government strategy to tackle it.