In a recent report, the UK’s Financial Conduct Authority (FCA) recognised the connection between the COVID-19 pandemic and the increase in scams, with 42% of its surveyed investors stating they are worried about the safety of their income in the current economic crisis. As people are forced online looking for a better return on their savings, the fraudsters have developed increasingly convincing ways to exploit the economic anxiety and demand for better investment opportunities
One particular trend the FCA identified during 2020 is the rise of clone firms. UK citizens have reportedly lost over £78 million to these scams, with an average loss of £45,242 per victim.
Clone firms are companies that appear to be legitimate by impersonating a genuine organisation. They can appear to be very convincing as, in the UK, they often use the licence details of the cloned organisation, so they look to be licensed by the FCA.
Once they have set up a clone firm, scammers use a variety of ways to entrap the unsuspecting. In addition to their well-established tactic of approaching investors directly by phone, email or text, they are getting bolder and buying up advertising spots on social media and search engines. These can appear authentic when they pop up in your search listings, with the names and styles of familiar firms, but they are often fronts for clone firms run by organised crime groups. Clicking on any links will take you to clone company websites or spoof email addresses.
In another scheme, fraudsters contact existing investment clients claiming to be from the FCA, or a law enforcement agency, and tell them that their firm, or specific investment manager, is under investigation. The investor is warned not to speak to anyone about the investigation, to avoid tipping them off, and then advised to encash their portfolio and move the proceeds into their bank account for safety. Once the fraudster knows they have cash readily available, they recommend an alternative investment opportunity, which will be the scam.
Despite these bleak statistics, you can protect yourself by keeping vigilant and taking a few simple steps to outwit the scammers.
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