Earlier today I reviewed the latest in a series of clone scams which have jumped on obscure EU companies with “passporting in” rights to offer regulated services in the UK.
The scammers pretend to be a company which is on the FCA register because it is registered with another European Union regulator and has the right to offer its services in the UK, known as “passporting in”.
Because the genuine company is obscure and has no web presence of its own (it may even have shut down but the FCA didn’t notice), the investor is unable to see, when they Google the company’s name, that there are two “Andreas Geigers”. There will be no phone number to ring to ask the real Andreas Geiger if they really offer bonds paying 17% per year.
Thinking that they have “done their research” by checking the FCA register, they happily hand over their cash and lose all their money.
One investor however still had concerns. They contacted the Financial Services Compensation Scheme to ask whether they would be protected if they invested their money with Andreas Geiger.
Who, let us remind ourselves, is some obscure German firm (if they even still exist) who has no authorisation to offer investments in the UK – only “insurance intermediation”. (And that’s the genuine Andreas Geiger, not the Andreas Geiger claiming to offer FSCS-protected bonds paying 17% per year.)
Alarm bells should immediately have gone off as to why anyone in the UK would ask whether an obscure German insurance intermediator was FSCS-protected.
They received this response: [emphasis added]
Thank you for your recent email.
Andreas Geiger (475002) is EEA Authorised. The compensation scheme in the country this firm is regulated in may be able to compensate customers if this firm fails. Contact the firm for specific details.
https://register.fca.org.uk/ShPo_FirmDetailsPage?id=001b000000MfzwkAAB
You should therefore contact the product provider as they should be in a position to confirm whether you would be eligible for FSCS protection, and also whether the investment itself is protected as they will understand the specific investment.
Kind regards
[Name withheld to protect the person copying and pasting an FSCS manager-approved template. -Brev]
Customer Service Team
Financial Services Compensation Scheme
Happily for them, the potential investor did not at this point follow the FSCS’ recommendation to contact the scammer for specific details. Who would have almost certainly have come up with a plausible spiel about why they were FSCS protected.
At this point the investor, happy that they’d done their research by both checking the FCA register and receiving direct confirmation from the FSCS, would have handed over their money.
Instead they contacted someone who was not completely useless, namely Bond Review. To quote the investor, [emphasis added] “This is what I received from the FSCS, they do not say don’t touch, but having failed with LC&F and Colarb I wont be going near.”
The risks of the potential investor asking the firm who has asked them for money if they are FSCS-protected, after the FSCS has told them that’s what they should be doing, should be screamingly clear.
It seems obvious to me that an investor who is taking the highly unusual and risky step of buying financial services from a firm from outside the UK should at the very least be told to use extreme caution and take independent advice. Or maybe just “don’t touch”.
But this is not obvious to the FSCS.
Maybe not everyone who asks the FSCS about the status of an EEA-authorised firm is being targeted by a clone scam. However the number of UK consumers who will use a passporting-in firm is very small, and the number of them who have any reason to be concerned about their FSCS status is even smaller.
If a retail consumer is asking the FSCS about the compensation status of a passporting-in firm there’s a high chance there’s something funny going on.
The regulatory system in general is aware of the passport clone scam because the FCA was recently told by the Complains Commissioner to compensate a consumer who had been misled by the FCA register and fallen victim to a similar scam as a result. (The FCA responded that as the Complaints Commissioner had no power over them, they could go swivel.)
I have flagged up to the FSCS that their template response risks misleading investors into investing with clone scams – as has happened in the past.
At time of writing I have received no response beyond an automated reply.