By Chris Lang
On 27 January 2021, the Financial Conduct Authority put out a press release that warns about “‘clone firm’ investment scams”:
The FCA is issuing a warning to the public as reports of ‘clone firm’ investment scams increased by 29% in April 2020 compared to March, when the UK went into its first lockdown. Action Fraud data reveals consumers reported losses of more than £78 million between January-December 2020. Throughout 2020, consumers reported average losses of £45,242 each on average when investing with fraudsters imitating genuine investment firms.
The figure of £78 million is likely to be much lower than the reality, because many frauds are not reported.
Three things the Financial Conduct Authority is doing
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, was interviewed on Radio 4’s Today programme the same day the press release came out. (The interview with him starts at 19:59.) Steward lists three things that the FCA is doing:
“The first thing is the warning that we are issuing today to tell people this is what’s happening. It’s not the first time we’ve warned about clones. And saying that the best way to protect yourself is to ensure that your using the information on our warning list as well as the information on our register, to ensure that you’re dealing with a legitimate firm. That means using the contact details on our register, not the contact details given to you by the clone firm.
“The second thing that we’re doing is we’re working with the National Economic Crime Centre to take down as many of these clones as possible. And obviously we’re following up the antecedents with NCA [National Crime Agency] and City of London Police to try and track down the perpetrators. Often they are not in the UK, which is a problem.
“The third thing that we’re doing is we’re now working with Nominet, which is the UK domain registry who is now offering us the service of taking down these clones when we identify them and then replacing them with an FCA warning sign on the internet, which is a great way of sending the message.”
In reply to a question about whether people can get their money back if they’ve been scammed, Steward says,
“Well there’s not much that can be really done, because the money disappears very, very quickly. And that’s why the warning, and prevention is so much better than cure, because the chances of getting money back, getting compensation from people who are using false names as well as the names of clone firms is very remote.”
The Financial Conduct Authority is worse than useless
The Financial Conduct Authority is very large organisation, with an annual budget of more than £630 million. Its head office was designed by the world famous architects Rogers Stirk Harbour and Partners. Yet, in the face of fraud costing individuals in the UK a total of about £7 billion each year, the best the FCA can do is to:
- warn people not let clone investment companies steal their money;
- work with the law enforcement agency and the police. Since many scammers are outside the UK, there isn’t much they can do; and
- close the stable door after the horse has bolted by getting scam websites taken down. Meanwhile, the scammers will set up another website, and continue the scam under another name.
Follow the money
Scammers are no doubt difficult to track down. But in order to steal people’s money they need bank accounts. And in order to do that, the banks need to know who they are. Banks are very easy to track down. But the FCA’s press release makes no mention of banks.
According to the FCA’s press release, victims of scams reported having lost £78 million to Action Fraud. The average loss was £45,000. Which means that the Financial Conduct Authority, the National Economic Crime Centre, the National Crime Agency, and City of London Police have 1,733 cases that they can start working on. In each case, victims have the details of the scammers’ bank accounts. Maybe, just maybe, that would be a good place to start.
On 25 January 2021, the Treasury Committee on Economic Crime held a virtual meeting in which politicians asked questions to Graeme Biggar, Director-General, National Economic Crime Centre, National Crime Agency, and others. Biggar acknowledges that the authorities should use bank data:
“We need much stronger intelligence capability, we have traditionally looked at fraud on the basis of victim reports. And that’s not sufficient. We need to combine it with bank data, we need to put our covert collection assets on it, we need to bring in the intelligence agencies.”
If only the National Economic Crime Centre was in touch with the Financial Conduct Authority. Oh, wait…