Over the last few months we have become aware of the problem of cloned companies, which seems to be an ongoing problem for recruiters and one they should be taking vigorous steps to deal with.
What is cloning?
Cloning companies operate by attempting to recreate an exact duplicate of the legitimate umbrella company which they target. To all intents and purposes, they try to appear to be an accredited supplier and will use the names of genuine providers, but with very subtle differences, in an attempt to defraud both agencies and contractors. The differences can be as small as a single character or number alteration from the original company name.
Having established what looks like a legitimate company, these companies then contact recruitment agencies informing them that their bank details have changed, in the hope of diverting funds into the fraudulent account. Members of staff may then make the requested changes to their own account systems, thereby diverting funds into the fraudulent accounts and not into the legitimate umbrella company accounts which they were originally intended for. This can lead to disruption for the recruiters and may impact on their ability to pay their contractors the money which they have legitimately earned.
An evolving problem
Despite the extra checks and balances which recruiters are now implementing, thanks to increased awareness of the problem, the scammers are becoming more devious and adapting their methods of attempted fraud.
We have become aware that some providers have claimed to have been cloned using this emerging trend as a way of operating disguised remuneration schemes. Funds from the supply chain are funnelled through to them and are used to pay contractors (rather than just fully retained by the clone company), but in non-compliant ways that skim tax etc.
Professional Passport has conducted extensive research into how these ‘evolved’ scammers operate and how they target their unwitting victims. We can now reveal the two most common trends.
Scammers are now tending to target smaller providers who operate within a relatively narrow range of recruitment agencies. The fraudulent newly cloned companies then attempt to set up a business relationship with agencies as completely new partners. Because of the limited range of the agencies’ partnerships there is less chance of them discovering the scammers’ activities within their existing arrangements.
Cloned providers are offering financial incentives to individual recruitment agents in order to obtain contractor leads. These can amount to significant levels of money in return for contractors’ personal information. When these individuals are targeted by the cloned umbrella companies with ‘offers’ they are then introduced to the recruitment agencies that the scammers have also targeted.
There is a wealth of good advice available for recruitment agencies on how to protect their businesses and reputations from clones and their unscrupulous originators. Two key steps are a) verify any requests to change providers’ details with your Single Point of Contact (SPoC) and b) double check that the ‘new’ bank details provide an exact match on the banking system..
In the second part of our investigation we will be offering further advice and information to recruiters to avoid financial scams and to protect professional reputations.
If you are an agency or organisation in need of advice around cloning companies or engaging with an umbrella company, contact email@example.com.