Bonds against the Scammers

Representatives from EHD and London City Bond (LCB) met with me on Tuesday 21^st April in Central London to discuss launching a new initiative – Bonds against the Scammers. In particular they will now be sharing information with each other and investdrinks about scam wine investment companies. 

Although in competition with each other, EHD and LCB are committed to making life difficult for wine investment scammers. This is certainly business that they do not want.

It is not wanted because wine should be enjoyable and they do not want to see their customers being ripped off. It is also not wanted because when things go wrong and the scam company goes bust or disappears, then it is usually the bonded warehouse that is left to pick up the pieces. Left to deal with understandably upset and irate investors, who may often have sunk a significant proportion of their life savings into wine they either doesn’t exist or for which they have been charged far too much.

Although the bonded warehouses are not in any way part of these scams, it is not surprising that some defrauded investors unfortunately assume that the bonded warehouses are somehow part of the scam.

HMRC (HM Revenue & Customs) and the money laundering regulations require bonded warehouses to carry out due diligence on customers wishing to open accounts. It is clear that these regulations put the emphasis on those wanting to open accounts to prove that they are legitimate.

LCB and EHD already do refuse to open accounts for companies they consider dubious as well as closing or freezing accounts of companies or individuals whose accounts arouse suspicion.

Often scammers refused an account at one bonded warehouse will apply to another bonded warehouse in the hope of slipping through. EHD and LCB agreeing to share information on companies and individuals refused an account or who arouse suspicion will make life more difficult for the scammers.

The bonds will also exchange information on their due diligence procedures and see how far these can be coordinated.  

We hope that other bonds especially other third party warehouses like Octavian will join in this initiative. 

Storage – may not be sexy but it is vital!

I suspect that many potential investors when contacted by a firm offering wine investments pay insufficient attention to where and how their wine will be stored. They are probably satisfied to be told that their wine will be in bond.  Some companies include insurance and warehouse charges in their prices – sometimes for three years and sometimes for five.

Many of these accounts are umbrella accounts. Also called customers' reserves. Here wines will be stored under customers' names but will be part of an umbrella account held by the wine company. This is a popular arrangement for both legitimate and less legitimate companies as the customer doesn't have the hassle of setting up their own account. However, this arrangement does have the serious drawback that the wine company can move wine out of your account without your permission and knowledge. Furthermore the bonded warehouse naturally takes instructions from the account holder – the wine company.

My advice is to open your own account with a bonded warehouse. This way you have full control over your wine. There are links to some storage companies on the right hand side of this site.

A possible customers' reserves scam
There is nothing to stop a company selling you some wine, putting it into an umbrella account at one of the UK leading bonded warehouses and perhaps inviting you to check with the bonded warehouse that your wine is safely in customers' reserves. Once you are reassured the company might decide to remove your wine and either sell it without your permission and pocket the proceeds. Alternatively they might create a new company and move your wine into a new account set up in the new company name with no indication that this was once your wine. It is quite likely that you would not become concerned until you either decided to sell your wine or if the initial company disappears and you become concerned as you cannot contact them. By which time it is, of course, too late as your wine has disappeared along probably with the people running the scam.

I understand from a reliable source that the Metropolitan police are currently looking at around 20 wine investment companies.