UK authorities have warned consumers of “fraudulent activity” in the country’s whisky cask market.
According to City of London Police, there have been 89 reports made to Action Fraud – the UK’s national reporting centre for fraud and cybercrime – regarding alcohol investments resulting in losses of £3m ($3.7m).
Misleading advertisements are touting year-on-year returns of up to 13%, documents from the UK’s Advertising Standards Authority show. The ASA said some companies are failing to warn consumers the sale of whisky casks is not regulated by the UK’s Financial Conduct Authority. Some adverts also do not alert consumers that a cask's value and actual liquid volume can decrease following purchase.
Detective Inspector Nichola Meghji, from the fraud operations team at the City of London Police, said: “An investment of a cask of whisky may seem like a wise choice, and perfect as a Christmas present to some but we would encourage everyone to stay vigilant and to not be sucked in – especially if adverts guarantee you will get year-on-year returns. Certain companies prey on people’s lack of knowledge around investing, which is then exploited at a great cost to the consumer.”
Last month, the ASA issued an enforcement notice following complaints about the advertisement of cask sales by Blackford Casks Ltd and London Cask Co Ltd.
The ASA found both sellers had misled consumers by quoting annual returns of 12% and 13% that were unsubstantiated. It has advised that the financial terms of future adverts should be “easily understood” by the targeted consumer and included a statement informing that cask sales are unregulated.
In its enforcement notice, the ASA set guidelines for the advertisement of whisky cask sales including that adverts should be clear that the value of investments can fluctuate, results are not guaranteed and that liquid volume will decrease over time.
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Last month, research suggested the value of the rarest and most expensive single-malt Scotch whisky is declining as global inflation hampers investor confidence.
Single malts sold at auction for more than £1,000 ($1,259) declined in value by 7% in the year to October compared to last year, according to Scottish Investment Bank Noble & Co.’s analysis of the whisky-auction market.
“The softening value of the world’s rarest and most expensive whisky suggests a weak global economy stifled by inflation is having an impact on investor confidence,” Noble & Co. said.
Volumes, however, increased 10% year-on-year to over 8,500 sales, as “general interest in the category continues to drive overall volume growth” Noble & Co. said.
