Increasing numbers of retail investors are falling victim to “impersonation fraud” as criminals clone popular investment products and dupe investors into parting with large sums of money.
The Investment Association, the trade body for UK asset managers, has warned that an estimated £4m has been lost so far, with firms across the industry reporting approximately 300 incidents in which serious organised criminals have impersonated their products.
Many of the scams involve fake investment bonds, which are promoted through fake price comparison websites, with criminals cloning established financial brands and producing fake documentation.
The IA said that fraudsters were targeting victims through sponsored links on search engines and social media sites, as well as harvesting personal details from fake call centres. In some cases, scammers had set up a range of email addresses and used the names of genuine members of staff at investment management firms.
Almost all of the 300 incidents of this fraud have been reported since mid-March. Many investors only become aware they have been scammed when they contact the impersonated firms chasing quarterly interest payments that have never arrived.
“During this time of great uncertainty, serious organised criminals have ratcheted up their operations and are increasingly ruthless,” said Chris Cummings, chief executive of the IA.
The Financial Conduct Authority calls these scams “clone firms”, as fraudsters use the name, firm registration numbers and addresses of firms authorised by the regulator.
“These scammers typically cold-call investors to promote shares, property or other investment opportunities that are non-tradeable, worthless, overpriced or even non-existent,” said a spokesperson for the FCA. The authority has added almost 200 such clone firms to a warning list since the start of March.
Scams have increased across the financial sector since the pandemic began. At the start of June, more than £5m in losses due to pandemic fraud had already been reported to the national fraud reporting centre. Pensions have been a target, as fraudsters target cash-strapped Britons tempted to draw on early-access pensions.
“Fraudsters will always try to take advantage of uncertainty,” said Steve Hyndman, the director of financial crime risk at Aviva Investors. “Fake comparison sites are a clever way to hook in savers, particularly during the uncertain times we are living through now.”
He added: “Retail investors should be particularly on the lookout for details of the contracts offered to them.” He said investors should be immediately wary if they are cold-called by someone offering investment products, or feel that they are being put under time pressure to invest.