We are not talking about the 2002 Episode II Star Wars film, but the 2020 scam epidemic. Fraudsters found fertile ground last year as people became more susceptible to these types of scams, due to the ‘perfect storm’ of the ongoing financial impact of the pandemic, the lack of face-to-face contact from lockdowns, combined with the reducing numbers of Independent Financial Advisers actively engaging new clients. It’s like a Catfish for Cash (for **those of you who, like me, have teenagers who watch MTV).

According to research carried out, two out of five investors (42%) say they are “currently worried” about their finances due to the pandemic – quite understandably, while three-quarters (77%) either have done or plan to make an investment over the coming six months to help improve their financial situation. As a result, those without existing relationships with advisers become more likely to fall for clone firms presenting themselves as legitimate investment companies.

The Financial Conduct Authority (FCA) reported they received nearly 4,000 reports of clone scams in 2020 and said that criminals are making it that much harder to spot them. April 2020 saw a month-on-month increase of 29% in these types of scams as the UK entered its first full month of lockdown. Over the course of 2020, fraudsters imitating genuine investment firms cost consumers an average of £45,242 each – with the total hitting £78m for the year.

How does it work?

It’s not the fault of the firm that has been cloned, let’s make that clear. It’s often very damaging for them and a sad situation for some great advisers and businesses. Fraudsters use literature and websites that mirror those of legitimate firms, as well as encouraging investors to check the firm reference number (FRN) on the FCA Register to sound as convincing as possible (as they also clone this).

The FCA warned that even experienced investors could be at risk of these clone firm scams, as despite 75% of investors saying that they “felt confident” they could identify a scam, 77% went on to admit they did not know or were unsure what a clone investment firm was.

What to do?

If you’re considering an investment with a new adviser, visit the FCA Register to make sure the firm you’re dealing with is authorised. Then importantly use the contact details on the FCA Register, not the details the firm gives you, and look for subtle differences to avoid ‘clone firm’ scams.

Also, go to a legitimate professional body directory (fake directories are also a potential problem) for example https://www.thepfs.org/yourmoney/find-an-adviser/ where you can search for members of the largest professional body for personal finance advisers.

And if you’re still unsure, call the FCA consumer helpline for further information. https://www.fca.org.uk/contact

The golden rule should be that, if you are in any doubt about whether or not the firm you are dealing with is legitimate, do not part with your hard-earned savings.

If you’d like to speak to one of the team about the anything discussed in this blog, or about your finances in general, contact us today at hello@ssfs.co.uk