The most common scam is that these bogus sellers are buying magazines from a genuine seller and then selling them on, OR they're selling for that badged seller, on their behalf for some reason.
Not everyone can sell the BI, there are some rules and they do HAVE to wear a badge/tabard etc and stick to their agreed pitch. You can report to BI office in your town if they are not doing that, though how much effort BI put into finding who is selling mags on I don't know.
The aren't all street dwellers - some will have supported flats or other reasons that they need the job, its a job for those experiencing financial hardship, not purely for the homeless.
I'd also be wary of judging someone for a nice haircut or nails, there are schemes that provide free hair cuts, nails and clothing so that people can go to interviews, and if you're a BI seller you are a lot more likely to be able to access such a scheme.
As I say with giving money to beggars/homeless people - do it if you want to, don't if you don't, but don't judge, it's not helpful, and don't decide what YOU think will be helpful, you're not in their situation and what you consider to be helpful may not be remotely helpful to them!