Investors lose millions as scammers clone legitimate firms - and AI is making the ruse more convincing

Investors are being warned over a wave of cloning fraud which aims to trick them into handing over huge sums of cash.

In the second half of 2024, there were 478 reports of investment management firms being impersonated by scammers in order to steal money from investors, according to the Investment Association.

Almost a quarter, 23 per cent, of these scam attempts were successful and consumers lost £2.7million as a result.

These scams see fraudsters masquerading as legitimate companies by creating duplicate websites, false emails or Whatsapp groups using a firm's brand and logo in order to steal money from unsuspecting victims.

The trade body warned that potential investors need to be wary of scam attempts.

It said investors should take the time to consider if something could be fraud, challenge any requests that might be a potential scam, and contact their investment provider immediately if they think they might have been scammed.

Adrian Hood, regulatory and 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.'

While the number of reported cloning scams in the second half of 2024 was lower than the 536 attempts reported in the first half of the year, the total for 2024 was 1,014, well above the 645 reports made in 2023.

Read More

In 2022, just 212 cloning scam attempts were reported.

Hood added: 'The growth of AI is likely to see increasingly sophisticated scams, with criminals better able to mimic legitimate firms.'

Action Fraud received 25,843 reports related to investment fraud in 2024, and says more than £649million was lost as a result of these.

While cloning scams appear to be the most prevalent of schemes targeting investors, the trade body also warned against account takeovers, with 132 instances of these reported in the second half.

Scammers use victims' information to change address or payment details of an account in order to take investment gains for themselves.

There were also 17 reports during the period of fraudsters using stolen card details to make investments.

In total, the Investment Association said 179 fraud attempts were successful with investors losing an initial £5.4million. Just £1.7million of this was recovered.

However, these losses had decreased 29 per cent from the first half's losses of £7.6million, while the value of the losses prevented increased to £11.9million, some 17 per cent higher than the £10.2million of losses prevented in the first half.