Grant Strachan

The recent BBC documentary Disclosure: Hunting the Whisky Bandits shines a spotlight on the impact of fraudulent actors operating within the Scotch whisky market – exposing fraudulent cask operations and hearing from investor victims who have lost significant capital sums.

The popularity of Scotch whisky casks as an investment continues to soar, but in a market where there is no regulatory authority or code of conduct to govern those that operate within it, carrying out due diligence has never been so important.

The lack of regulation does not mean that cask trades should be avoided. It is worth emphasising that the majority of whisky brokers are reputable businesses; a good one will bring great value to the process through their sector knowledge and relationships. Their role is to purchase casks directly from a brand owner and subsequently sell those casks to a buyer-client; or introduce buyer-clients to a distillery that wishes to sell a specific cask.

Unfortunately, the actions of a small minority pose a serious threat to the reputation of legitimate brokers, as well as to the international reputation of the whisky sector.

There are many factors to consider when buying a whisky cask – including decisions on reselling or bottling, and being aware of potential labelling, duty suspension and bottling costs that go above and beyond the initial cask purchase. In light of fraud risks though, cask buyers also need to be aware of what to look for when going through the buying process. Some legal, commercial and practical points to consider include:

Inspect the broker: Prior to undertaking due diligence on the proposed cask, buyers should investigate the broker. Company information, including accounts filed and directors’ details are publicly accessible on Companies House.

Establish the cask’s existence: A genuine cask can be identified by reference to a unique cask number linked to the warehouse.

Identify the cask’s location and whether its quality and condition can be assessed: Note that casks can only be held in HMRC-bonded warehouses - a full list of which can be checked on the HMRC website.

Find out who owns the cask and whether a ‘delivery order’ will be issued. While it is no longer a mandatory legal requirement, ‘delivery orders’ are still widely used within the industry to document and register the transfer of cask ownership. The exchange of a delivery order gives a clear audit trail of cask ownership (and transfer of ownership).

Obtain a contract of sale from the seller. This should include:

• a full description of the whisky with reference to the distillery, age and year of distillation;
• a description of the cask type and volume;
• details on any resale restrictions; i.e. future bottling or exclusion of ‘naming rights’ to the whisky;
• and confirmation on ongoing warehousing and insurance costs and whether those are included in the purchase fee. If a rare and premium cask is purchased, the buyer should confirm that warehouse insurance coverage will be sufficient to cover its value.

The Scotch Whisky Association has recently published updated guidance on this topic, which emphasises the importance of buyer due diligence based upon a personal assessment of the risk factors involved. It is crucial that a buyer understands exactly what they are buying and who they are buying from. By undertaking some homework from the start of the process and by seeking professional advice, cask buyers can take steps to minimise any risk factors for themselves.

Grant Strachan is a partner at Brodies LLP. This article was originally featured in The Scotsman on 21 April 2025.