Distillers conference

Cask whisky investors warned about fraud threat

Cask whisky fraud will be debated this week

Whisky investors are being warned about the increasing number of cask whisky investment companies who may be acting unscrupulously to make money out of the growing demand for premium Scotch.

A panel of whisky experts will meet in Glasgow this week at the inaugural Scottish Distillers Conference to debate the current lack of regulation in the market and air concerns about certain traders exploiting loopholes.

Currently, cask whisky trading, where brokers source and sell casks from distilleries and blenders, is unregulated.  There is no official or published record of the buying and selling of whisky casks and no established legal process for the trade.  

According to the Scotch Whisky Association, Scotch whisky exports in 2022 grew by 37% by value to £6.2 billion. The membership organisation does not offer advice to private investors.     

Last Friday the Advertising Standards Authority issued a new enforcement which strengthened the rules on the advertising of whisky cask investments. 

Vikki Bruce, the founder and director of CaskNet, a technology start-up company, is building software, founded on block chain technology, aimed at solving the problem.

She said: “I first discovered this alarming situation when I was asked to investigate a parcel of whisky casks valued at over £20m.

“The buyer had no ability to verify the casks’ ownership or existence, never mind whether the whisky inside the casks was the real deal. My experience is that there are unscrupulous brokers around the world who are capitalizing on the complete lack of regulation or accountability, and consumers are getting scammed.”

She said HMRC is gathering duty and the Scotch Whisky Association represents its affiliate membership, made up of distilleries. But there is no regulation to protect the consumer in what is a newly-developed marketplace. 

“With assets ranging in value up to multi millions of pounds, the opportunity for fraud is rife,” said Ms Bruce.  “We know a major problem exists; we don’t know yet how deep it goes. Almost certainly, what we have seen reported in the press is the tip of the iceberg.”

Blair Bowman, a whisky broker, and adviser to the whisky industry, has been an outspoken critic of many new whisky cask investment companies. 

He said: “Unfortunately, there are numerous so-called whisky cask investment companies in the market who are exploiting the lack of regulation and are joining the whisky industry from other luxury and lucrative markets such as wine and art. 

“Something needs to be done to eradicate those traders who don’t care about customers, much less protecting the reputation of Scotch whisky.  They are in it simply to make money quickly.

Also joining the conference line up is Alan Powell, a former HMRC policy officer who has advised distillery businesses for over 40 years in their duty and excise responsibilities.  

He said: “There is already room for government support in this market in terms of alcohol due diligence and alignment with existing authenticity schemes, such as the SDVS, DVLA and sophisticated tobacco product track and trace embedded in HMRC’s duty controls. 

“A system could be easily adapted within existing law or by simple modification.”

The Scottish Distillers Conference in Glasgow on Wednesday is expected to attract 150 delegates.

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