Sadly, the threat of umbrella company cloning doesn’t appear to have faded away. Instead, it remains a severe danger to the industry. If you work for an umbrella company, you must understand what umbrella company cloning is to protect your own business. But it isn’t just umbrella companies that need to be vigilant. Recruitment agencies, end-hirers, and temporary workers should all read up on umbrella company cloning because any supply chain member could become the victim of fraud. Please keep reading, and we’ll explain more, and we’ll provide an example of suspicious activity on Companies House that we believe is umbrella company cloning.
Why are umbrella companies being cloned?
It appears that umbrella company cloning is taking place to deceive supply chain members into thinking the cloned umbrella is the established umbrella. The reason for doing this is almost certainly to commit fraud by tricking a recruitment agency, for example, to send workers’ payments to a “new” bank account that they believe belongs to the umbrella they have a relationship with. Instead, the cloned umbrella will receive funds – leaving the agency out of money. And the knock-on effect could be very severe because the legitimate umbrella company might not receive the appropriate funds for its employees – meaning temporary workers could be left unpaid.
Former CEO at the Freelancer and Contractor Services Association (FCSA), Phil Pluck, shared his views on why umbrella companies are being cloned. He said:
“I can only assume that this cloning activity is designed to persuade others to think that they are dealing with a legitimate partner and that there is a financial motive underlying this activity.
This is not just aimed at FCSA companies, and so I would advise any agency dealing with any partner company where money is transferred to agree on a clear transfer protocol with their partner and to treat with caution any approach that states that banking arrangements have been altered or bank accounts have changed and that funds should now be diverted to that account.
We live in a highly cynical cyber world where there are many attempts to steal money from innocent parties. Thanks to the detailed due diligence checks that we have in place at FCSA, we were able to alert FCSA members and their partners to this issue at the earliest possible moment.”
“These [clone] companies are cloning documents and asking for the bank details to be changed. This is feeding funds through to them so they can skim the tax, NI and VAT payments.”
Here is a possible example of umbrella company cloning on Companies House
A director on Companies House has registered seven companies in December 2021 and January 2022, and all sound remarkably similar to existing umbrella companies and contractor accountancy firms.
Below are the companies that have been registered, along with their company number and a link to their Companies House profile.
|Company Name||Company Number||Link to Companies House Profile||Date of incorporation|
|UMBRELLA.CO.UK PAYROLL LTD||13805043||Click Here.||16 December 2021|
|FIRST FREELANCER LTD||13802231||Click Here.||15 December 2021|
|CLEARSKY CONTRACTORS ACCOUNTING LTD||13807032||Click Here.||17 December 2021|
|STERLING UMBRELLA LTD||13806870||Click Here.||17 December 2021|
|DATAMATICS UK-EU LTD||13829023||Click Here.||5 January 2022|
|CONTRACTORS UMBRELLA LTD||13806871||Click Here.||17 December 2021|
|DOLAN ACCOUNTANCY UMBRELLA LTD||13805041||Click Here.||16 December 2021
Below is a screenshot of CLEARSKY CONTRACTORS ACCOUNTING LTD, a company that we believe has been cloned and created with unethical intentions. The director’s company portfolio is available on Companies House.
How to stay safe from the risks associated with umbrella company cloning
Umbrella company cloning poses a severe threat to the entire supply chain, and all parties must be prepared and educated on the topic. Here is some advice for recruitment agencies, umbrella companies and temporary workers on how to stay safe from umbrella company cloning and fraudulent activities within the sector.
Advice for recruitment agencies and end-hirers
- Read up on umbrella company cloning by visiting well-known and reputable sources of news within the industry. For example, Contractor UK, IT Contracting, the FCSA’s website and Professional Passport’s website.
- Never change payment arrangements to an umbrella company until you have spoken to your contacts at the company first. It appears some cloned companies have posed as the legitimate payroll provider to try and trick agencies and hirers into making payments to incorrect bank accounts.
- Report any suspicious activity to HMRC, the FCSA and Professional Passport.
- Send reminders to your temporary workers about the risks posed by cloned umbrella companies.
- Do not open emails you suspect may be sent to you by criminals.
- Stay in frequent communication with your approved payroll providers and work together to ensure payment procedures are secure and there are no vulnerabilities.
- Never transfer money to a new account until you’ve cleared it with your preferred partners. Ask your bank to confirm the details are correct too.
- Keep your devices up to date with anti-virus software, etc.
- Ensure internal systems are secure and work with cyber-security professionals if required.
Advice for contractors
- It’s rare that contractors need to send money to the umbrella company and this only really occurs if an overpayment has been made – usually by accident. However, if you’re ever asked to send your umbrella company money, ring them first and ensure you are certain the details you have are correct.
- If you ever receive an email from your umbrella that you think is suspicious – report it to your umbrella immediately.
- Never click on a link you do not trust.
- Only ever use umbrella companies that are accredited by either the FCSA or Professional Passport.
- Keep your devices up to date, including your anti-virus software, etc.
- Check websites online for the latest industry news – such as Contractor UK, IT Contracting and umbrellacompanies.org.uk.
- Speak to fellow contractors about the risks posed by umbrella company cloning and fraud within the sector.
Charlotte Gerrish, founder of the law firm Gerrish Legal, shared her recommendations for contractors to stay safe from umbrella company cloning fraud. On the back of suspected umbrella company cloning affecting Giant Pay earlier in 2021, she said:
“Finally, given Giant’s security breach and reports of ‘clone’ umbrella companies set up for the purposes of fraud, it is recommended that contractors vet and audit the GDPR and information security compliance of any new umbrella company BEFORE signing up with that company. In a candidate-driven market, especially where niche and highly skilled IT contractors are extremely sought-after, umbrella companies cannot afford – financially or reputationally — to be lax with GDPR compliance requirements since contractors can have their pick of providers.”
More information is available in our article: Advice For Contractors And Recruitment Agencies To Stay Safe From Cyber-Criminals When Engaging With An Umbrella Company.
Top 10 umbrella companies
To help our readers find the very-best payroll providers out there, we’ve collated a list of our top 10 umbrella companies, and we recommend you check them out. Every umbrella is accredited by either the FCSA or Professional Passport, and some have special offers at the moment.