The financial impact of investment fraud is decreasing, but brand cloning scams continue to pose a serious threat to UK consumers, according to new figures released by The Investment Association.
In the second half of 2024, losses from investment scams dropped by 29%, falling from £7.6 million in the first half of the year to £5.4 million. The data points to growing consumer vigilance and proactive efforts by investment firms as key reasons for the decline.
However, despite the positive trend, brand cloning fraud remains the most common form of scam targeting investors. Nearly 480 reports of brand cloning were recorded between July and December 2024; a scam that involves fraudsters impersonating legitimate investment managers.
Alarmingly, one in four of these impersonation attempts were successful, costing victims a total of £2.7 million.
Brand cloning is a sophisticated form of fraud where criminals impersonate genuine financial firms by mimicking their branding, websites, and marketing materials. The goal is to lure unsuspecting investors into parting with their money under the false belief they are dealing with a trusted institution.
This type of fraud typically involves fake online advertisements, social media profiles, and even cold calls purporting to come from well-known financial institutions. Victims are often drawn in by the promise of high returns and professional-looking documentation.
The Investment Association has expressed concern that the persistence of brand cloning scams undermines public trust in the financial services sector.
Alongside brand cloning, other forms of investment fraud also remain prevalent. The report highlights card fraud and account takeover as two additional tactics used by criminals.
Card fraud involves using stolen or falsified debit card information to initiate investment transactions. Meanwhile, account takeover sees criminals change an investor’s personal or payment details in order to withdraw funds or redirect returns into their own accounts.
The proliferation of these deceptive tactics coincides with the rapid advancement of artificial intelligence technologies, which security experts warn is dramatically enhancing fraudsters’ capabilities to create convincing impersonations. “The growth of AI is likely to see increasingly sophisticated scams, with criminals better able to mimic legitimate firms,” cautions Adrian Hood, the association’s regulatory and financial crime expert.
Despite the continuing threat, the decrease in total losses is a positive sign that awareness campaigns and enhanced verification systems are beginning to take effect.
To help consumers protect their finances, The Investment Association is promoting the “Take Five” campaign, a national initiative offering simple steps to stop fraud:
Stop: Before providing personal information or making a payment, take a moment to pause and think. Scrutinise email addresses and website URLs carefully.
Challenge: Consider whether the request could be fraudulent. It’s okay to reject or ignore unsolicited offers.
Protect: If you suspect you’ve been scammed, immediately contact your investment provider using official channels and report the case to Action Fraud.
This approach has been credited with helping to reduce the number of successful scams, as individuals and firms become more equipped to identify suspicious activity.
Investment firms have stepped up security protocols, including more robust Know Your Customer (KYC) checks, fraud detection systems, and public awareness drives. Regulators, too, have been pressuring online platforms and search engines to act more swiftly in removing scam adverts and fake websites.
Despite these efforts, The Investment Association is urging further collaboration between the private sector and law enforcement agencies to close the gap on brand cloning operations.
The warning comes as more retail investors turn to online platforms and social media for investment opportunities, making them increasingly vulnerable to targeted fraud schemes.
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