In association with
Save content
Have you found this content useful? Use the button above to save it to your profile.
Unauthorised transfer of money
iStock_sestovic_transferring_money

ICAEW member excluded for unauthorised withdrawals of client money

by

An ICAEW member has been excluded from the institute after borrowing hundreds of thousands of pounds from the client accounts to pay his staff salaries and to keep his business solvent.

28th Mar 2022
In association with
Save content
Have you found this content useful? Use the button above to save it to your profile.

Charles Fowler has been excluded from membership of the institute after admitting to: taking large sums of money from his client accounts without permission over a period of six years; failing to ensure sums of over £10,000 held for more than 30 days were paid into separate accounts; and permitting funds drawn from his firm’s client account which were greater than the sums held in respect of the relevant client.

As reported in March’s disciplinary orders, Fowler, a member of ICAEW since 1973, has been ordered to pay a £15,000 fine and costs of £27,006.

The Surrey-based sole director of a company (“the Firm”) provided secretarial, payroll and accounting services to contractor clients who operated through their own limited companies.

Client Money Regulations

In October 2017 the ICAEW received an anonymous complaint alleging the misuse of funds in the client account. The ICAEW subsequently carried out an investigation resulting in complaints alleging breaches of the ICAEW Client Money Regulations (“CMR”). 

Complaint 1

This relates to a breach of CMR 20, which provides that a firm may withdraw from a client bank account but only with written consent or written contractual authority.

The firm operated two client bank accounts and it was the ICAEW’s case that between December 2011 and March 2018 Fowler withdrew multiple sums from client accounts without the required permission. The evidence was that there were large sums withdrawn and deficits of cash in both accounts, which were at their highest over £400,000.

Over the course of the investigation Fowler admitted that he had borrowed money from the client accounts and that he did not have permission to do so. He was unable to recall the exact date that this commenced but accepted that it had been going on for a few years. He was also unable to confirm the maximum amount that was taken. He stated that as of December 2017 the amount borrowed was around £250,000 but this was not at its peak as he had been paying off the sums in chunks.

Fowler stated in an interview with the ICAEW Professional Conduct Department (“PCD”) that he had used cash from a pension and had released equity from his house to repay the money borrowed. He also stated that he had not stolen the money and he had done what he did to keep the practice going and that if he had let it go bust, jobs would have been lost and liabilities unpaid.

Fowler further explained in a letter to the PCD that in the past he had “used client funds to pay staff salaries, so that clients’ accounts and clients’ payroll could continue to be processed, rather than closing down the practice and causing considerable financial loss and distress to clients.”

Complaint 2

The second complaint alleged that Fowler had breached Regulation 13 of the CMR by failing, on a number of occasions, to ensure that money in excess of £10,000 held on behalf of a client for more than 30 days was held in a separate account.

The tribunal highlighted one example where Fowler held a sum for one client in excess of £40,000 in a client account. The payment wasn’t due on this money for several months, but Fowler noted to the investigation committee that it would have been “inconvenient” to set up separate bank accounts and to “keep transferring the money back to the client account”. 

Complaint 3

The third complaint related to a breach of Regulation 21 of the CMR in that there were two occasions where the balance held for a client in the firm’s client account had been overdrawn. The sums in question were £11,353 and £346,60 for periods of 141 and 285 days respectively.

Complaint 4 

The investigation committee alleged that Fowler had not fully and promptly complied with the PCD's requests for information. This related to delays in providing some of the documentation requested by the PCD and for not providing records relating to a period between 2000 to 2011. Fowler's case was that he had disposed of the documents which pre-dated April 2012.  

Tribunal’s verdict

Fowler did not attend nor did he submit any representations and the hearing proceeded in his absence. The Disciplinary Committee found complaints 1, 2 and 3 proven.

Complaint 4 was found not proved on the basis that, although the documents sought could have been provided quicker, the volume and complexity of the material was such that any delays were not such that it should be considered to have been non co-operation. In relation to the documents that had not been retained the tribunal did not consider this to amount to a breach of DBL10.7.  

In respect of the matters that were proven, the Disciplinary Committee considered that these complaints against Fowler showed he had “a wholesale and deliberate disregard for client money obligations”. While the tribunal didn’t see any evidence of clients losing money and accepted that the money had been paid back the tribunal said, “The mere fact that he had used the client account for his own purposes meant that client funds, running into very significant sums of money, had been put at risk.” 

The tribunal noted that Fowler had shown no remorse for his actions or insight into his conduct and matters were not helped by the ICAEW member already having had disciplinary action against them before. A consent order was made against Fowler in October 2008 for practising without a valid practising certificate and without insurance. At the time Fowler was issued with a fine and a severe reprimand. The matter was well over a decade old, yet the tribunal felt it was relevant in sentencing Fowler. 

Judging all the factors together, the tribunal concluded that the case was at the higher rather than the lower end of the scale and ordered Fowler to pay the combined costs and fine of £42,006.  

Ben Schofield, senior solicitor at Blake Morgan, and Matthew Corrie, barrister at 9 BR, commented:

“The allegations against Mr Fowler were very serious breaches of the CMR and so exclusion and an order to pay a large fine and high costs award were always a risk in this case.

"However, it is noted that Mr Fowler, although he engaged with the investigation, did not participate or provide representations in the proceedings before the disciplinary committee. In the light of this non-engagement, the Disciplinary Committee concluded that there was no remorse for his actions or insight into his conduct. This was likely to have been a significant factor in the gravity of the sanction in this matter.

"However, Mr Fowler had made admissions and repaid the money and had he been able to present evidence of remorse and insight, it is arguable that a different category of the Guidance on Sanctions, which had a lesser sanction as a starting point applied and a better outcome could have been achieved. This is an example of a case in which the member could have benefitted from being represented at the final hearing.”

Blake Morgan’s accountancy regulatory team is available to assist with any disciplinary, regulatory and compliance matters arising in the accountancy profession - click here if you require any of their services.

Replies (16)

Please login or register to join the discussion.

avatar
By Paul Crowley
28th Mar 2022 16:43

This is usually the area that the legal profession get caught on (having created fictions to dupe the reporting accountant)
Those are serious sums held on client account
Makes my client account look pathetically tiny

Thanks (0)
A Putey FACA
By Arthur Putey
28th Mar 2022 17:21

Wonder if his companies took CJRS grants and CBILS or Bounceback Loans?

Thanks (1)
avatar
By Hugo Fair
28th Mar 2022 19:38

I can't believe how light the fine was ...

The statement that he had “used client funds to pay staff salaries, so that clients’ accounts and clients’ payroll could continue to be processed, rather than closing down the practice and causing considerable financial loss and distress to clients” is not only indicative of a 'lack of remorse' ... it suggests a total disconnect between reality and his perception of it.

Thanks (4)
avatar
By Calculatorboy
28th Mar 2022 20:07

The problem is the unregulated never get publicised like this..it all gets lost in failed expensive civil actions ....at least regulation works and no loss to the public ..unlike a local cowboy who stole 750k from a widow with very little recovery ..

Thanks (3)
Replying to Calculatorboy:
avatar
By BryanS1958
30th Mar 2022 18:09

I just lost a substantial amount (6 months rent plus rent plus rent deposit) when my rental management agent went bust. They took the funds from the tenant, but never passed them on to me, nor did they protect the deposit.

The director had taken loans of £400k+ from the company over the years, which left it without funds to pay its obligations.

Estate agents should be required to hold funds on client account (some do, but not mandatory). Mine was supposed to hold insurance to protect, but I bet that the liquidators will find he didn't!

Thanks (0)
7om
By Tom 7000
29th Mar 2022 09:56

And I sit and fret if there's a random 7p difference on the client account bank rec....

Mind you it takes some doing to run a firm of CAs at a loss....

Thanks (0)
avatar
By djn
29th Mar 2022 09:58

I can't understand how there could have been that amount of money sitting in the client account?
Makes our client account look like small fry.

Thanks (2)
Replying to djn:
By Husbandofstinky
29th Mar 2022 10:20

And there could potentially be another can of worms...

Thanks (0)
avatar
By Ben Alligin
29th Mar 2022 10:23

Well done ICAEW.

Tipped off in October 2017, and ICAEW justice is meted out in March 2022. Working at top speed again; they even manage to make HMRC look efficient (three words I never thought I would ever write)!

Thanks (2)
Slim
By Slim
29th Mar 2022 11:04

Must have been a major player to have 400k go through the client account for those type of services to contractors

Thanks (0)
Replying to Slim:
avatar
By Hugo Fair
29th Mar 2022 11:40

Not sure why the anonymity (of the "Firm") is preserved in the article ... but, although there are a lot of Charles Fowlers who are/were CAs, this looks a good fit https://uk.linkedin.com/in/crsfowler
... unless anyone knows better?

Thanks (3)
Replying to Hugo Fair:
Slim
By Slim
29th Mar 2022 12:04

Ah yep that's the chap.

Thanks (0)
Replying to Hugo Fair:
avatar
By dwgw
29th Mar 2022 17:32

If that's him, he seems to be a pillar of society - which should immediately raise suspicion!

Thanks (2)
avatar
By Mr J Andrews
29th Mar 2022 12:57

Fool Fowler fell foul big time. Exclusion from the Institute with such a relatively light fine seems a small price for the ''borrowing''.There's much more to this than meets the eye. Non participation before the Disciplinary Committee - tantamount to ''No Comment'' in ''Line Of Duty'' - says it all.

Thanks (0)
avatar
By CJaneH
29th Mar 2022 13:50

Solicitors operating client accounts have to have them checked annualy by an audit registered accountantant. Should this not apply to accountants?

My observation of practice assurance visits is that checks were limited to client matters & records. Did include client accounts but did not check for matters like VAT & PAYE for the practice (up to date and correct?), Income Tax or Corporation Tax for the practice (up to date & correct), loans from clients, business relationships with clients (ie running business's) etc.

Thanks (0)
Replying to CJaneH:
avatar
By Paul Crowley
30th Mar 2022 13:38

"Solicitors operating client accounts have to have them checked annualy by an audit registered accountantant. Should this not apply to accountants?"

Solicitors get reports by accountants, just like a few other trades
Why would an accountant need an accountant?

Practice visits ALWAYS include the client account: a review of bank statements and reconciliations

Your suggestion is that qualified people need further regulation, giving the unqualified yet more business advantage, as they would not need to be "audited"

Thanks (0)