Cloning scams are now the biggest fraud threat to investors, with £2.7m lost in late 2024. The IA is urging vigilance, while The Timebank’s Damian Davies shares three simple steps advisers can use to help protect clients.
The Investment Association has revealed that brand cloning scams were the leading source of fraud impacting consumers looking to invest in the second half of last year. The Timebank’s Damian Davies has outlined three practical steps that advisers can take with clients to help protect them from such scammers.
Cloning scams happen when a criminal creates a nearly identical duplicate of a genuine website, or email, or even creates a fake WhatsApp group, using a company’s brand and logo, to trick people into parting with their money.
In the second half of 2024, there were 478 reports of investment management firms being impersonated by fraudsters, just under a quarter of these attempts were successful (23%), with consumers losing £2.7 million.
The IA is warning firms and consumers to remain vigilant, particularly in the face of cloning scams.
The trade body highlights three main types of scams consumers and firms should be alert to:
- Cloning: A firm has been impersonated by fraudsters mimicking their website or emails, to trick people into thinking they are making a genuine investment.
- Card fraud: When a criminal uses false or stolen debit card details to make an investment. In H2 2024 there were 17 reports of this type of fraud.
- Account takeover: Where the fraudster uses information they have gained about an individual to change the address or payment details of an account, in order to cash in the investment and gain the proceeds for themselves. In H2 2024 there were 132 reports of this type of fraud.
Scammers are getting ever more sophisticated. The growth of AI is likely to see increasingly sophisticated scams, with criminals better able to mimic legitimate firms.
But people can protect themselves by taking some simple but important steps.
Maybe you could include these three tips in the next newsletter you send to your clients.
- Take a moment to stop and think if someone asks for your money or information about you, double check a sender’s email address or website URL because criminals often use addresses that look like legitimate ones but may have slight differences.
- Also ask yourself, could it be fake? It’s OK to reject, refuse or ignore any requests. We will always be here if you need to check that anything from us is legitimate.
- Finally if you think you’ve been scammed, contact Action Fraud.
The IA’s data shows how firms and consumers are reducing the financial impact of fraud by remaining vigilant.
Losses due to fraud decreased by 29%, falling from £7.6 million in the first half of 2024 to £5.4 million in the second half of 2024.
The value of losses prevented also increased, from £10.2 million to £11.9 million, a 17% increase, while the amount of losses recovered increased to £1.7 million.
Adrian Hood, regulatory and financial crime expert, at the IA said: “Criminals will use a variety of means to trick people into parting with their money, whether that’s impersonating genuine investment managers, stealing card details, or fraudulently logging into a person’s account.
“That’s why we’re urging consumers to stay vigilant. With cloning scams topping the list of threats, consumers should double check whether websites or emails are legitimate before transferring any money.”
Fraud data was submitted to the IA by 95 member firms, managing £4trn of assets (total for all IA firms was £9.1trn), including £772bn of authorised funds (total for IA firms was £1.3trn).
A total of 748 frauds were identified, of which 179 were successful, resulting in an initial loss of £5.4m. Of this £1.7m was subsequently recovered.
Sharing these kind of useful tips with clients, especially when it doesn’t earn you any fees directly, goes a long way to helping secure the trusted relationship you have.
