The fund managers’ trade body, the Investment Association (IA), has warned that brand cloning scams have become the “leading source” of fraud risk with hundreds of investors losing millions of pounds.

Nearly 1,900 investors (1,871) have lost money to clone scammers since the second half of 2022, IA fraud figures reveal.

The IA says that overall consumers lost £2.7m to fraudster in just the last six months of 2024, with one in four fraud attempts now successful.

To mark Fraud Prevention Week, the organisation has issued a public warning to investors to remain vigilant in the face of a growing threat.

Cloning scams occur when fraudsters “clone” or copy the name or website of a bona fide investment manager to cheat investors into handing over their cash. In some cases the scammers create nearly identical duplications of legitimate investment websites or fake WhatsApp groups, often using a company’s brand and logo to trick people.

The FCA issues dozens of warnings about clone investment firms each week.

Latest IA fraud figures for H2 2024 reveal that:

• In the second half of 2024, there were 478 reports of investment management firms being impersonated by fraudsters

• Just under a quarter of fraud attempts were successful (23%), with consumers losing £2.7 million. 

The IA says there are three main types of scams consumers need to be alert to.

• Cloning attacks where fraudsters try to pass of a fake website as legitimate, often using similar names:

• 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.

The IA is urging investment clients to stop and take a moment to check if someone asks for money or information. Consumers should check sender’s email address or website URL – criminals often use addresses that look like legitimate ones but may have slight differences. Consumers should ask if anything looks fake and reject, refuse or ignore any requests if they have suspicions.

Consumers who believe they may have fallen victim to scams should contact their investment provider or platform immediately, ensuring these are the genuine contact details, and report it to Action Fraud.

On the positive side, IA data also shows how firms and consumers are reducing the financial impact of fraud. 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.

IA Fraud Data 2022-2024 (per reports of fraud):

Source: Investment Association. Fraud data was submitted 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.

Adrian Hood, regulatory & 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. The growth of AI is likely to see increasingly sophisticated scams, with criminals better able to mimic legitimate firms.”