The FCA which is the UK’s regulator estimates that in 2018 scammers took an estimated £14,600 on average from victims in the UK alone.
Firms being cloned by opportunistic criminals has been a rising trend in recent times.
The process follows a similar angle, but can be performed in such a sophisticated way that even the most alert investor cannot tell the difference.
According to the FCA, the number of companies being cloned is on a continuing upward trajectory.
The FCA keeps records of the number of firms being cloned and continues to issue warnings, proving that the phenomenon will not end anytime soon.
With any criminal activity, when a scam succeeds, it is repeated and improved by criminals. It should be a worry that cloning continues to be a success.
What to look for
A clone of a company is an entity that has been created to look exactly like a well-known and often prestigious firm.
For these clone companies to mask themselves, they will often have details such as director addresses and details that appear genuine.
Their listed telephone numbers will appear to be the same as the genuine company but might have a slight difference which can only be picked up on close inspection.
These numbers will take callers to a holding number which routes them through to someone who is working the scam.
Other popular methods of cloning information is for fraudsters to create a URL which is very similar to genuine FCA firms. These tricks will also take close inspection to uncover.
Clone firms often have websites which ask you to fill in a contact form. If you fill it in, you are providing valuable information for fraudsters.
This is because the fraudsters will have multiple ways to reach you and can contact you at any time, or add you to a database so you can remain an ongoing target of new scams.
Why are cloned firms dangerous?
The single biggest motive for going to the trouble of creating a clone firm is to defraud investors of their money.
It is an act of organised financial crime which preys on the tendency of some investors to be less alert than others.
The mechanism of the clone firm appearing to be some other well-known firm drops the guard of the investor and causes them to miss crucial red flags.
Once you have parted with your money, it is very difficult to get it back. These firms operate in jurisdictions with limited financial oversight, making it almost impossible to bring them to justice.
How to protect yourself from being a cloned firm victim
With so many trading firms out there, it can be time-consuming for investors to check the validity of each and every one.
Checking addresses and other details, as well as stress-testing website links and other company information can suck the joy out of investing.
But these are real checks that have to be performed. If you do not perform due-diligence on the places you invest your money, your investment career could be very short.
The most critical advice is to do your own research.
You may use a review site to check if your broker is safe. But can you trust the review site?
It is always recommended that you research your proposed broker yourself. At the end of the day it’s your money you are investing.
If you do choose to do the vetting yourself, one recommended route to take is to use the FCA Financial Services Register to check for the status of the firm you wish to work with.
They have up to date details and a helpline in case you suspect you have been scammed. Another prominent oversight body is FINMA of Switzerland where you can check that your broker is FINMA regulated by using their register search.
The FCA posts helpful ways to check whether the firm you are dealing with is genuine. Some top tips include calling the switchboard number listed in the FCA register.
If it is not reachable then this is a red flag. Popular tactics that criminals use according to the FCA are going so far as to quote the real company’s Firm Registration Number and their address.
They can mimic the real company’s website and slightly mask the contact numbers to route you through to their own numbers. The FCA suggests you should check their details via the Companies House.
This is strong evidence that investing in the right jurisdiction will always give you the checks and balances which make sure your money is safe.
However, once again be sure to double check the links and copy and paste from FCA and FINMA websites to be sure that you are directed to the genuine site.
Common evasion tactics
If you do have a working relationship with representatives of what you believe to be a clone company, there are ways to find out if they are genuine.
It is not uncommon for fraudsters to use evasion tactics such as claiming that a firm’s contact details on the Register are out of date.
This is not likely as the FCA updates their register very frequently. But sometimes unfortunate investors won’t know this.
Some other evasion tactics include fraudsters claiming that their parent company is registered in a foreign market, making it unnecessary to include as much detail about the child company you have been introduced to.
You might have been cold called by a convincing person who has worked on their pitch to get it as believable as possible. If you don’t know all their evasion tactics you won’t know what questions to ask.
If the worst happens, and you are defrauded by a clone firm, the best thing to do is to act quickly and report it as soon as you can to the FCA. You can also take the legal route, which costs time and money but has to be done.
However, as always, prevention is better than cure. When investing your hard-earned money, you cannot be too careful about investing it with the right people and companies.
Make sure you do your research to avoid being the next candidate for the would be scammer.