Written evidence submitted by the Investment Association

1.0               Introduction

1.1              This document comprises the Investment Association’s response to the Treasury Committee’s call for evidence on economic crime.

1.2               The response concentrates on two specific areas relating to consumers and economic crime, setting out the current trends in prevalence and the work being done to mitigate economic crime by the investment management industry.

1.3               The response also makes three recommendations for Government action which together would make it more difficult for criminals to reach consumers, improve the response from the authorities and raise consumer awareness.

2.0               About the Investment Association

2.1               The Investment Association (IA) represents the UK-based investment management industry. Our 250 members manage £8.5 trillion of assets for clients across the world.

2.2               Investment managers sit at the heart of the UK economy, help three quarters of households save for their future, through ISAs and pensions, while investing £1.6 trillion in the UK economy, including through shares, infrastructure investment and increasingly direct lending to small businesses.

3.0               Retail investors as a target of economic crime

3.1               There are a variety of methods that economic criminals and scammers employ to extract funds from consumers who are looking to invest their savings. However, since Covid-19 one particular method known as a “cloning” scam has become more widespread, eclipsing all others.

3.2               More and more often, criminals are targeting retail investors who are proactively looking for investment opportunities online via adverts placed on search engines and social media platforms.

3.3              Commonly, targets are initially taken in by sponsored adverts promoted by the likes of Google and Facebook. These adverts direct users to fake (and some genuine) price comparison websites, or to the cloned website of a well-known and respected investment manager. Many of the top results for a Google search of ‘top rate investment bonds’ appear to be fake.

3.4               These leads are passed on to professional-sounding call centres where personal details are harvested. The fraudsters typically set up email addresses which resemble those of investment managers to help trick victims. The fake price comparison sites will often ask for considerable ‘know your client’ information, including (copies of) passports.

3.5               The victims are then passed to the scammer’s sales team, on what appear to be London telephone numbers. The fraudsters are known to use, at times, the names of genuine members of staff to further propagate the illusion of legitimacy. While many of these could have been derived from the FCA Register, some could not. The fraudsters must also be sourcing these in other ways, such as LinkedIn.

3.6              Plausible contract notes are issued to the person being targeted and the sales team complete the ‘sale’ by arranging for payment via wire transfer/BACs. The bank accounts used are, of course, not legitimate and have been known to utilise a variation of the company name of the investment manager the victim thinks they are transferring their funds to.

3.7               At this point some targets will be warned by their banks that they should not complete payment, as the recipient is believed to be a fraudster. For a few of the more fortunate victims, certain banks have compensated victims, up to £85,000, while others have allowed them to claim for compensation via the banks’ voluntary Authorised Push Payment (APP) code. Many others though tragically have no prospect of having their funds returned to them.

3.8               The Covid-19 pandemic and subsequent economic uncertainty has provided the ideal ecosystem for fraudsters to take advantage of vulnerable people looking to invest funds in a low interest-rate environment, or when they have lost significant sums in the markets and are looking to make relatively quick returns.

3.9               In addition, investment scams are particularly difficult to track. In the method we have described, the criminals are offering quarterly dividend payments. This means that frequently consumers only become suspicious when they hear nothing about their ‘dividend’ three months after transferring their money. After this amount of time has elapsed, tracking those responsible becomes near impossible; the cloned websites have disappeared; the phone numbers deactivated, and funds transferred on into other accounts. The criminals are often overseas and using technology to appear to be UK based. The sophistication of these scams means there is little footprint online or otherwise to trace those responsible.

4.0               Scale of the issue

4.1               Between July and October 2020, the total number of reported incidents of investment impersonation scams have nearly quadrupled from approximately 300 to 1,175 with the average fraud loss value at £46,093.

4.2               With the incident growth, the estimated total reported loss to savers from these scams has more than doubled from approximately £4m in July to £9.4m in October with over 200 people impacted.

4.3               Due to the nature of the crime, the age profile of the victims tends to be those in or approaching retirement. As such many have no realistic prospect of being able to recoup the money stolen from them and can result in financial hardship.

4.4              Victims have also reported suffering from non-financial impacts, such as strains on personal relationships, feelings of shame and embarrassment, and fear and mistrust of contact from strangers and the financial system.

5.0              Case study

5.1               In June 2020, Mr F researched investments online by entering the keywords “best rates on bonds” in a search engine. He visited a website from the results, which appeared to be a comparison website for bonds and registered his contact details to find out more about the products on offer. Mr F cannot recall the name or address of this website.

5.2               Around 17th June, he was phoned by someone purporting to be RL (name of a genuine employee) from Aviva Bonds Plc and offering a 6.125% fixed-rate bond for 2 years. This person also emailed Mr F with details of these products.

5.3              The fraudster was well-spoken and purported to be Senior Portfolio Manager at Aviva Bonds Plc. He was using what appeared to be a London landline number and his email address was from “” which looked like an official Aviva domain.

5.4               Mr F decided to go ahead with the investment. As part of the money laundering checks and compliance process, he was asked to email a copy of his passport and of his bank statement. He was then sent an application form via DocuSign and signed it electronically on 26 June.

5.5               The application form displayed the Aviva logo, a postal address of Aviva, St Helen’s, 1 Undershaft, London, EC3P 3DQ and a website of

5.6               Mr F then received an email from DC who purported to be from the accounts team and provided him with the receiving bank details for the investment payment. The account appeared to be in the name of a money transfer service.

5.7              At the end of June, Mr F visited the local branch of his bank to make a payment of £50,000 to the bank account provided. The cashier advised him to beware of scams and asked him to check that the investment he was about to make was not fraudulent. Mr F contacted the person purporting to be RL to gain assurance that the investment was legitimate, which he confirmed. He was also sent a link to an article in a newspaper in an attempt to independently verify that the investment was legitimate.

5.8               Mr F went back to his bank’s branch and advised the same cashier that he was happy the investment was real and wanted to make the payment. He then emailed RL and DC with confirmation of the payment, but his emails were returned undelivered.

5.9               He wanted to make sure his policy was in force, so he called Aviva on a genuine phone number on 13 July. Aviva confirmed to him that Aviva Bonds Plc is not an Aviva company and is a malicious domain and there is no DC working for Aviva. Additionally, Aviva explained to Mr F that while RL is an Aviva employee, he is not a Senior Portfolio Manager and he is not the person who Mr F was liaising with. It was also confirmed Aviva does not offer a 6.125% fixed-rate bond and has no affiliation to the money transfer service which name appeared on the receiving bank account name.

5.10              Aviva’s response was to report the fraudulent domain used by the scammers, liaise with the receiving bank and the money transfer service to collate intelligence on the fraudulent payment, as well as flag to DocuSign the use of their platform by scammers impersonating Aviva. This resulted in further security measures put in place to remove the fraudulent DocuSign accounts used in the scam.

5.11              Mr F was understandably in shock and reported this scam to West Yorkshire Police, as well as his own bank and the receiving bank on 14 July. The receiving bank advised that it was up to Mr F’s bank to investigate and consider compensation.

5.12               As his bank advised the payment did not fall under their Voluntary Code, Mr F raised a complaint with them. He explained that he had visited the branch to make this payment and felt that the bank had not provided him with the relevant support to identify this as a scam and prevent the payment from being sent to the scammers.

5.13               His complaint was rejected by the bank on 3 September. With the support of Aviva, Mr F then took the matter to the Ombudsman in October and is currently awaiting a response from them.

6.0               The response of investment managers to economic crime as it affects consumers

6.1               The investment management industry has undertaken a dual-track approach to recent growth in cloning scams. In response to more cases of fraud, the industry has focused on raising consumer awareness of scams and ensuring firms share best practice and information relating to fraudulent and malicious activities.

6.2               The aim of this twin-track approach is to ensure economic criminals have a smaller pool of potential targets, and that investment management firms have the infrastructure and relationships to share the details of any new crime trends quickly and efficiently. In turn, this helps educate consumers and the cycle of resistance through an informed position builds.

6.3              The industry has also been doing all it can to support the authorities in having the cloned websites taken down and the scammers behind them tracked down.

6.4               However, as an industry we feel there is space for better cohesion around reporting and investigating these crimes within law enforcement and official bodies. Currently, the slow pace at which these are undertaken means investigations are often ineffective. Time is lost liaising between organisations, inadvertently providing criminals with more time to remove the little evidence they do leave online.

Consumer awareness

6.5              In response to the acute growth in economic criminal activity since the start of the Covid pandemic, the IA, along with many of our members, has warned about the effects of this in the media and called for consumers to remain vigilant online. Strategic press activity has been undertaken to try and make the public aware of how to protect themselves from becoming victims. In addition, the IA is collaborating with other organisations and consumer groups also focusing on reducing the effect of economic crime.

Sharing best practice

6.6              The IA and the wider investment management industry has sought to share best practice to ensure there is a continuous loop of information of fraud awareness and prevention available to investment managers and professionals in our industry. This creates a consistently high standard throughout the industry and works to help those who have been defrauded. The IA has collated and shared best practice on:


7.0               Recommendations

7.1               The IA and the investment management industry is committed to undertaking action and practices which reduce the prevalence of economic crime targeted at investors.

7.2              However, without legislation and better regulation of online platforms and search engines; a more streamlined approach to reporting and investigating economic crime; and greater consumer awareness; the prevalence of economic crime will continue to grow. To meet these aims, we have set out the following recommendations:

7.3               Bring online financial scams within the scope of the upcoming Online Harms Bill.

7.4               Better collaboration between the regulatory bodies and crime fighting organisations which currently operate in this space.

7.5               Finally, practical financial education which includes information on economic criminal activity is necessary. Government and regulatory backed programmes of financial education should be available at appropriate life moments, such as Key Stage Three, Post-18 education and upon retirement.

November 2020