07 Mar
2004
Forgers beat whisky tax with holograms
CRIME LORDS in China and Eastern Europe are preparing to make millions of pounds from selling duty-free whisky in the UK after cracking a new security system designed to prove the tax has been paid.

The warning comes in a leaked letter from a leading security consultant to HM Customs and Excise, which reveals international gangs are gearing up to mass-produce imitations of the planned whisky duty strips.

It says the security strips, which would be used to prove the duty had been paid, could be copied within three weeks, effectively making them useless.

Whisky intended for sale overseas can be bought at a fraction of the UK shop price, as tax represents 70% of the cost. Whisky fraud already costs the British Exchequer £600m in lost tax revenue.

The letter - written by Drew Samuel, managing director of Gavin Watson, one of Britain’s leading makers of security products - warns the whisky industry faces financial disaster because of crime gangs’ access to sophisticated technology. Samuel said in China alone there were at least 25 manufacturers supplying sophisticated hologram-making machines on a ‘no-questions-asked’ basis, and that organised criminals targeting the European drinks market were believed to have already acquired several.

The £50,000 machines are able to produce perfect forgeries to order. The plans currently envisage placing an individually numbered strip, which would incorporate a hologram, around the cap of each bottle.

But in his letter, Samuel said: "The skill of the counterfeiters has been grossly underestimated. Apart from the ease of apparently authentic numbering, holograms have been globally downgraded as a protection.

"There appears to be what could only be described as a ‘headlong rush’ towards a so-called ‘solution’, which in its projected format could only create more problems than those it would solve."

Samuel said perfect replicas could be made within three weeks. "Ironically, because the forgers keep all their profits, they are sometimes able to afford better materials, such as top-quality paper, and their fakes can actually look better than the real thing."

Asked how he would tackle the level of fraud in the whisky trade, he said: "There are a number of things. For example, the forms that accompany consignments of spirits and the way in which they are authenticated is pretty basic. There is a lot of scope for making them harder to falsify."

Most of the factories that offer the hologram-faking equipment are based around Quzhou in the eastern Chinese province of Zhejiang, which lies to the south of Shanghai.

Li Guorong, client services manager of the China United Intellectual Property Protection Centre in Beijing, said:

"We have problems with corruption, with the size of China and our huge population."

David Williamson, spokesman for the Scotch Whisky Association, said: "This letter is important evidence, from an expert in security systems, that the proposed tax strips will not work. They are expensive to implement and they will be all too easy to copy." Williamson added that the industry had drawn up alternatives to the tax strip proposals, including better security for warehouses, bar-coding on documents and licensing of wholesalers.

Angus Robertson, the Scottish Nationalist MP for Moray, who has opposed the tax strip scheme, said: "International experience has shown that tax strips are prone to massive fraud, and the government will make a big mistake if they are introduced."


Article Courtesy of The Scotsman

scotsman.com