Viewpoint: Attack of the umbrella clones – the sequel

A new threat to compliance is on the rise in the umbrella sector

In recent months we have seen the emergence of cloned companies. This problem has not gone away. But now there is a twist to be aware of.

What is cloning?

Cloning is a process in which an exact duplicate is made.

In the umbrella sector, the scam works by companies attempting to appear as if they are an accredited provider, using a name with very subtle differences to a compliant business, in an attempt to go undetected. Their fake name may be one letter away from the original name.

The cloners seek to extract money from recruiters who think they are dealing with a compliant business, by telling them their bank account details have changed. 

It is imperative that agencies verify any requests for changes to their providers’ details and double-check bank details before completing any transaction.

How is the problem evolving?

As awareness has grown around cloning, the behaviour of scammers is also changing as they work to bypass the extra checks and balances that agencies are putting in place.

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.

Two common trends are:

  1. A move to ‘clone’ smaller providers, who then try and set up with agencies as completely new partners. As the original providers do not operate with a wide spectrum of agencies, there is only a small possibility of a clash with the chosen agency’s existing arrangements.
  2. Cloned providers are obtaining contractor leads by paying significant levels of money directly to individual recruitment consultants. Contractors are attracted by the ‘offers’ made by the cloned companies, who then introduce them to recruitment agencies as their selected umbrella company. 

Advice to agencies

Agencies must conduct detailed checks when engaging with any new provider to ensure the provider is credible and genuine.

Check the company name and the Companies House registration number is an exact match of the accredited provider. Be sure the name given for a provider’s bank account is a match for the name of the registered company. Any discrepancies should raise an alarm.

Clone companies are working hard to entice recruiters to share confidential information so that these scammers can contact contractors. Recruiters must not be tempted as those who enter such dubious practices can mean that agencies are breaching a number of rules, including bribery, tax evasion and data protection.

Cloning remains a real risk in the sector. But with the non-compliant providers becoming increasingly sophisticated in obfuscating their true offering and identity recruiters must stay extra vigilant.

Crawford Temple is CEO and founder of Professional Passport, independent assessor of payment intermediary compliance.

Image credit | Shutterstock

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