Combating the clones: Tackling fake firms

The Financial Conduct Authority (FCA) issued 78 warnings in 2015 to protect consumers from an increasingly common and insidious type of fraud: cloning. But this is just the tip of the iceberg

Action Fraud, the UK’s national fraud and internet crime reporting centre, received 8,821 reports of investment fraud, including clones, in the year ending March 2015 – an increase of nearly 2,000 on the previous year. Very much like traditional boiler room scams, fraudsters from clone firms cold call potential investors to promote shares, property, wine or other types of assets that are worthless, overpriced, non-existent or impossible to trade. But those involved in cloning take the idea even further by convincing potential victims that they are members of staff calling from genuine firms authorised by the FCA.

The fight backCity of London Police has been working with the banking sector, the National Crime Agency and the Home Office to develop a joint taskforce to look at how this type of crime can be prevented and illicit payments stopped. Adrian Leppard, Commissioner of City of London Police, the UK police force that leads on economic crime and runs both the National Fraud Intelligence Bureau and Action Fraud, says: “We already share information on money laundering cases with the banks in order to prevent crime and to identify potential criminal networks, and are keen to do more with our partners in Europe as well.”

However, he believes the key to prevention is making sure the public is properly informed about fraud. “Every officer in this country can give useful advice to members of their community on how to prevent a burglary. Can the same be said with regards to more modern offending?” 

To ensure police officers are able to provide such advice, City of London Police has developed a ‘prevention hub’ that shares information with other police forces so they can understand and pass information on to the public.

Earlier this year, City of London Police, Trading Standards and Metropolitan Police visited a number of offices in the Square Mile, Canary Wharf and Westminster as part of a co-ordinated, intelligence-led drive to uncover suspected boiler rooms and inform the virtual and serviced office providers that they were unknowingly providing criminals with prestige addresses from which to promote their scams. They also distributed flyers outside London transport hubs and warned workers of the consequences of being part of a criminal operation that cold calls people in the UK with bogus investment opportunities.

Self checksMembers of the public, meanwhile, can check their adviser’s details on the Financial Services Register. But from March 2016, bank employees, including financial advisers, will no longer be listed. Instead, employers must certify their staff members themselves. This change is likely to be extended in the future to employees of wealth management and investment firms. The move may seem to be counter to the desire to ensure investors are properly informed and able to protect themselves from fraud. But a spokesman for the FCA says the regulator does not believe certification will make life easier for fraudsters. In fact, it could make stealing the details of staff members harder, because of the shift in responsibility to the banks for ensuring their staff are ‘fit and proper’. 

It is still essential, however, to use the FCA’s various resources to check whether firms are who they say they are. With the threat from fraudsters on the rise, a little checking can go a long way to ensuring investments don’t fall into the wrong hands.

The original version of this article was published in the December 2015 print edition of the S&IR.
Published: 30 Dec 2015
  • Integrity & Ethics
  • Wealth Management
  • The Review
  • Features
  • Finance
  • financial crime prevention
  • FCA
  • financial crime

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