Attack of the clones: Fraudulent firms

Tim Chapman explores the fraudulent companies that attempt to operate under the umbrella of a regulated firm. A customer or investor may be ensnared by clone firms and it is vital that the FCA promote this risk.

ClonedFirms250Financial service providers in the UK are regulated by both the Financial Conduct Authority and the Prudential Regulation Authority, providing more surety for UK consumers and investors in that their money is safer, and looked after more attentively.

The two pronged nature of regulation since April 2013 has also meant that the intense scrutiny the firms come under has increased, and losses and indiscretions are more closely monitored.

Although by no means providing firms with an ‘FCA stamp of approval’, regulated firms offer more assurance for their customer and client base and therefore attract more attention from the market place.

Not surprisingly, this has also increased the number of cloned firms circulating throughout the financial services arena. The nature of cloned firms is to pretend to operate under the umbrella of a regulated firm.

The fraudulent companies attempt to drum up business via cold-calling investors to promote various investment platforms that are unable to be traded, massively inflated or are non-existent.

To try and keep up the pretence of authenticity, these clone firms have been using a term known as ‘firm registration number’ in which those addresses and personages authorised by the FCA, are utilised to keep up the charade that they are reputable and trustworthy firms.

How do cloned firms ensnare customers and operate?

All financial service providers need to be regulated by the FCA in relation to their selling processes, including promotions, marketing, shares sales and implementation. Cloned firms align themselves with a regulated firm, to keep up the charade of trustworthiness.

Once ensnared, a potential customer or investor is then given the cloned company’s details and begin to communicate through them.

To entrap investors, these firms claim a variety of reasons for their lack of immediate regulatory visibility when separated from their clone firm, such as:

  • That as a firm, their contact details on the FCA register are out of date, which is nigh on impossible as this is updated weekly
  • Fraudulent firms claim to be under the umbrella of an overseas organisation that do not have full details listed on the FCA register
  • Fraudulent firms have been known to clone websites and making changes to the phone number.

 

What can the FCA do alongside investors?

All the FCA can realistically do is review the FCA register, as well as investors, who need to be vigilant in their outlook. They both need to promote the register of authorised firms to keep other investors abreast of developments.

This is an instance when regulatory compliance within the UK market is in the hands of the consumer/investor. The FCA have a vital responsibility to present and promote the risk of cloned firms.

Fortunately, for those who have invested in clone firms, they will have access to the Financial Ombudsman Service and Financial Services Compensation Scheme.

 

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