The Whiskybroker Detective Agency….

20 Jan

Other than the first two paragraphs and the last paragraph, this text is copied and pasted from Excise Notices so please don’t blame me if you’re bored! As an Excise Warehousekeeper, we are responsible for performing due diligence checks on all owners of Under Bond (Duty Free) products in our warehouse. Some of your will have heard a lot from us about this recently, being asked what seem to be a lot of pointless questions which you may feel are none of our business. You don’t know the half of it! We have an additional document that we compile about you, which contains information from everywhere else we can find.

I think that it is a discgrace that HMRC are asking us to do their job for them, searching into private data, checking Google, social media, Companies House and credit companies for your every little detail. As an Excise Warehousekeeper, I think that it should be my job to ensure that Duty is paid when it is supposed to be paid and goods move only to a warehouse or destination that they are supposed to move to. The key issue with all of the below is that we are expected to be able to show that we’ve done all these checks years later, including with owners who we did not sell casks to. I should not have to look at your address on Google Maps, and decide that it looks like a business premises and therefore you must not be a private individual like you’ve stated on your new customer form.

HMRC Notice 196 states that we must:

  • objectively assess the risks of alcohol duty fraud within the supply chains in which you operate
  • put in place reasonable and proportionate checks, in your day-to-day trading, to identify transactions that may lead to fraud or involve goods on which duty may have been evaded
  • have procedures in place to take timely and effective mitigating action where a risk of fraud is identified
  • document the checks you intend to carry out and have appropriate management governance in place to make sure that these are, and continue to be, carried out as intended

As it typical with HMRC, they don’t give you an exact method or a list of information that you must gather. They want us to do their job for them. The lack of clarity means that when they have a question regarding a customer, even if we have a questionnaire (we do have this) which requires that customers tell us why they own the casks and sign it, HMRC can come along as they did a few days ago and suggest that this is not enough, suggesting (never giving certainty), that we must ask more, and rather than a tick box, yes/no questionnaire, we must ask detailed questions about intentions.

Further to Excise Notice 196, we have Excise Notice 2002, which lists fraud “risk factors” and some of the checks that we must perform.

Things we check (after you’ve completed your questionnaire):

  • financial health of the company you intend trading with
  • identity of the business you intend trading with
  • terms of any contracts, payment and credit agreements
  • transport details of the movement of the goods involved whether or not you’re directly involved in this
  • existence/provenance of goods – where goods are said to be duty-paid you should normally seek sufficient detail to satisfy yourself of the status of the goods
  • the deal, understanding the nature of the transaction itself, including:
    • how the cost of the goods is built up, for example, whether it includes appropriate taxes, transport, and so on
    • why is it being offered
    • whether it’s too good to be true
    • how the deal compares to the market generally

Financial health:

  • you should undertake credit checks or other background checks on the business you intend trading with
  • where a poor credit rating is identified, establish how the transactions will be funded – what security can be offered that you will be paid
  • where credit is offered by the business, confirm who’s providing the credit facility
  • check what payment terms are offered and if they’re commercially viable


  • check company details provided to you against other sources (for example, websites, letterheads and telephone directories)
  • ask whether your customer or supplier is a member of a relevant trade association
  • obtain copies of certificates of incorporation, VAT registration certificates and excise registration certificates where appropriate and where a trade class is quoted on these check whether or not it relates to the type of trade you’re engaging in
  • verify VAT and excise registration details with HMRC, including checks of the online look up system for AWRS approved wholesalers (HMRC recommends that these checks are undertaken regularly for new trading arrangements and proportionately longer for trusted ones, unless you suspect a problem)
  • obtain signed letters of introduction on headed letter paper and references from other customers or suppliers
  • insist on personal contact with a senior official of the prospective supplier and where necessary, make an initial visit to their premises – you should use this opportunity to confirm the identity of the person you intend doing business with and keep a record of your meeting
  • establish what your customer’s or supplier’s history in the trade is – and if this can be evidenced
  • obtain the prospective customer’s or supplier’s bank details – in the case of an import or export, check if the supplier or recipient share the same country of residence as their bank
  • establish who you’ll be paying and if this is the same company as the one you’re directly dealing with
  • if you’re providing a service check who will be paying for it

Terms of any contracts, payments and credit agreements:

  • carefully consider the terms of any contracts and credit agreements before entering into these and challenge elements which appear unusual
  • confirm what recourse there is if the goods are not as described
  • if payment is to be made to or from a third party, check if there’s a sound commercial reason for this
  • if payment is to be made to or from a third party, confirm if it’s to or from an off shore account
  • check if there are there normal commercial arrangements in place for the financing of the goods
  • where payment is made from an overseas business confirm how it’s to be made
  • check if your supplier has referred you to a customer who is willing to buy goods of the same quantity and brand as being offered by the supplier
  • confirm if your supplier offer deals that carry no commercial risk for you, for example, no requirement to pay for goods until the payment is received
  • consider if the goods are adequately insured
  • check are high value deals offered with no formal contractual arrangements
  • where you are buying from a broker, consider:
    • what overall value does this link in the supply chain add
    • is it possible to source more directly
    • how competitive is the broker’s pricing to those from a more direct route
    • how are the savings made in a longer supply chain to make it viable
  • where transactions are being financed by a third party, check if this person is a regulated financial body such as a bank



  • who is responsible for the transport and if the cost of the goods is inclusive of transport – if so, does this mean that the potential logistical costs make the unit price unrealistic
  • that details of delivery vehicles are retained and if necessary, any variations to expected transport arrangements recorded

Existence or provenance


  • how the trader contacted you
  • if the goods exist
  • if can you inspect the goods before purchasing them
  • if they’re in good condition and not damaged
  • if the quantities on offer seem credible for the type of business you intend trading with
  • getting sufficient detail to satisfy yourself that the goods are duty-paid – this will be easier the closer you are in the supply chain to production

The deal


  • the nature of the transaction, including:
    • does it just look too good to be true
    • if the alcohol has come from abroad but is of UK origin, how did this occur and why
    • where incentives are offered, when these are taken into consideration does this make the overall deal seem too good to be true
    • why is it being offered
    • have normal commercial practices been adopted in negotiating prices
    • how does the price compete with that offered by competitors
    • what is the age of the goods – if the stock is old you should seek an explanation as to its provenance
    • does the price seem realistic – you should be aware of unit cost when duty and VAT values are removed
  • if you’re already established in a trading agreement HMRC would also recommend that you continue to monitor correspondence and business paperwork to identify changes in those arrangements and take any follow up action as necessary

If you’ve read all of the above, I’d be interested to know your opinion of my solution to the above requirements. We currently have a system called the SDVS (Spirit Drinks Verification System) which has an online lookup facility where you can search by Postcode or by Facility to find all approved bottling/warehouse facilities. Why can we not have this system for cask owners? Every single owner could register on this system, with their name, address, email address and state whether they are a private owner or not. HMRC could have questionnaire which meets their standards and hold the answers on record. If people’s details change, they could log on and change them. This would remove much of the due diligence requirements from the warehouses (we’d do as much as actually benefits us rather than hours of detective work). I know there are data protection issues, but the system could be set up so that only warehousekeepers and HMRC can log in to check other people’s details. HMRC could even add a reporting email address where warehouses could report if they think an owner is lying and is actually a trader. It could also have the ability for warehouses to periodically update how many casks an owner has in their warehouse. At the moment you can have 5 casks in every warehouse in Scotland and claim to be a private owner and nobody would ever know., because there is no cross checking. I’m sure that this idea can be refined to make it work for everybody.

So when we’re asking you what seem like pointless questions, and then asking you them again a year later, please don’t be annoyed with us. HMRC have the power to do whatever they want if we haven’t shown that we’re doing these checks.

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