Mr Mohammed Iqbal Chaudry of Bingley, UK CIMA Disciplinary Committee Hearing held on 18 March 2019 and 27 June 2019

References in this decision to Regulations are to those in the Institute’s Royal Charter, Byelaws and Regulations (2018) and references to Rules are to the Institute’s Disciplinary Committee Rules 2015, in both cases unless otherwise stated. The charges against Mr Chaudry were as follows: Facts relating the Charges

“1. You are a registered CIMA member.

2. At all relevant times you were a chartered management accountant with (as well as beneficial owner and director of) CFD Accountancy Ltd (or its predecessor firm(s)) ("CFD").

3. In early 2011, you agreed to act for RH and JH in relation to the development and

conversion of the former Royal Sea Bathing Hospital in Margate. The services for which you were engaged included acting for Company A as a nominee director. CFD was also engaged by Company A to deal with accounting operations.

4. During a meeting prior to your engagement, RH made you aware that he was an

undischarged bankrupt, having been made bankrupt in May 2010.

5. On 31 July 2009, RH gave an undertaking under the Company Directors'

Disqualification Act 1968 that for a period of six years he would not, without the

leave of the court, be a director of a company or in any way, whether directly or

indirectly, be concerned or take part in the promotion, formation or management

of a company (the "Disqualification Undertaking").

6. On 27 April 2011, RH gave a bankruptcy restriction undertaking that for a period

of five years he would not, without the leave of the court, be a director of a company or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company (the "Bankruptcy Undertaking").

7. You did not become aware of the Disqualification Undertaking or the Bankruptcy

Undertaking until 3 September 2012.

8. The corporate structure implemented under your engagement is set out at point 5

under Background below.

9. From 13-14 July 2011, you acted on the instructions of RH in relation to a payment of

£400,000 to Company A, by making payments out of this amount to other group companies. The source of these funds was a loan agreement between Ms HB and RH.

10. You did not conduct any client due diligence checks beyond obtaining copies of

RH's and JH’s driving licenses and passports.

11. You did not record the terms of CFD's retainer in writing.

12. You did not obtain a copy of the loan agreement referred to in paragraph 9 above,

and you did not make any enquiries into RH's capacity to issue instructions in

relation to the onward payment of those monies out of Company A’s account.

13. You did not maintain adequate records regarding your dealings with RH and JH.

14. In these circumstances:

(a) your actions at paragraph 10 constitute a failure to comply with the

obligation to conduct enhanced due diligence under Regulation 14 of the

Money Laundering Regulations 2007;

(b) your actions at paragraphs 11-13 constitute a failure to maintain

supporting records in respect of a business relationship under Regulation 19 of the Money Laundering Regulations 2007; and

(c) your actions at paragraphs 11-13 constitute a failure to establish and

maintain appropriate and risk-sensitive policies and procedures relating

to record-keeping under Regulation 20 of the Money Laundering

Regulations 2007.

Charge 1 - Failure to conduct appropriate client due diligence

15. By reason of the facts alleged at paragraphs 1-9, 10, 12 and 14(a) above, you are

guilty of misconduct as defined in Byelaw 1 of the Institute's Royal Charter

Byelaws and Regulations (July 2010 version).

16. In particular, you have failed to comply with the Laws of the Institute by breaching

the fundamental principle of Professional Behaviour (Sections 100.5(e) and 150.1)

of the Code of Ethics (October 2010 version) because:

(a) You (as beneficial owner and director of CFD) failed to comply with

Regulation 14 of the Money Laundering Regulations 2007, which are

"relevant laws and regulations" for the purposes of Section 150.1 of the

Code of Ethics (October 2010 version).

(b) A reasonable and informed third party, weighing all the specific facts and

circumstances available to you at the time, would conclude that the actions

set out at paragraphs 10 and 12 above adversely affect the good

reputation of the profession.

17. This also amounts to a failure to comply with Rule 7.4(v) of the Member in

Practice Regulations (September 2010 version), which requires that you comply

with current HMRC money laundering regulations.

18. In addition, you have failed to comply with the Laws of the Institute because you failed to apply appropriate safeguards for the purposes of Section 210.3 of the Code of Ethics (October 2010 version), for example by conducting a search of the Companies House database of disqualified directors or the bankruptcy and

insolvency register.

Charge 2 - Failure to record the terms of your retainer

19. By reason of the facts alleged at paragraphs 1-9 and 11 above, you are guilty of

misconduct as defined in Byelaw 1 of the Institute's Royal Charter Byelaws and

Regulations (July 2010 version).

20. In particular:

(a) You have failed to comply with the Laws of the Institute in that you have

failed to record the terms of your retainer in writing in accordance with

Rule 7.4(ii) of the Member in Practice Regulations (September 2010

version).

(b) You have failed to comply with the Laws of the Institute by breaching the

fundamental principle of Professional Behaviour (Sections 100.5(e) and

150.1) of the Code of Ethics (October 2010 version). Specifically, a

reasonable and informed third party, weighing all the specific facts and

circumstances available to you at the time, would conclude that the actions

set out at paragraph 11 above adversely affect the good reputation of the

profession.

Charge 3 - Failure to keep sufficient records of client instructions and communications

21. By reason of the facts alleged at paragraphs 1-9 and 11-14 above, you are guilty of misconduct as defined in Byelaw 1 of the Institute's Royal Charter Byelaws and Regulations (July 2010, August 2011, and October 2012 versions).

22. In particular, you have failed to comply with the Laws of the Institute by breaching

the fundamental principle of Professional Behaviour (Sections 100.5(e) and 150.1)

of the Code of Ethics (October 2010 version) because:

(a) You (as beneficial owner and director of CFD) failed to comply with

Regulations 19 and/or 20 of the Money Laundering Regulations 2007,

which are "relevant laws and regulations" for the purposes of Section

150.1 of the Code of Ethics (October 2010 version).

(b) A reasonable and informed third party, weighing all the specific facts and

circumstances available to you at the time, would conclude that the

behaviour alleged at paragraphs 11-13 above adversely affects the good

reputation of the profession.

Background

1. Mr Chaudry was, from 18 April 2011, a chartered management accountant with (as well as beneficial owner and director of) CFD Accountancy Ltd (or its predecessor firm(s)). This was the company through which accountancy services were provided to the RJH group of companies in relation to the project at the Royal Sea Bathing Hospital in Margate (the Margate Project).

2. On 31 July 2009, RH gave an undertaking under the Company Directors’ Disqualification Act 1968 that for a period of six years he would not, without the leave of the court, be a director of a company or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company (the Disqualification Undertaking).

3. On 27 April 2011, RH gave a bankruptcy restriction undertaking that for a period of five years he would not, without the leave of the court, be a director of a company or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company (the Bankruptcy Undertaking).

4. Mr Chaudry first met RH in December 2010. At this initial meeting RH confirmed to Mr Chaudry that he was an undischarged bankrupt, having been made bankrupt in May 2010. RH also informed Mr Chaudry that he wanted Mr Chaudry and a Mr D to be directors of, and to provide accounting services to, the companies which were to be formed for the purposes of the Margate Project.

5. In February 2011, Mr Chaudry and Mr D had a further meeting with RH and his son, JH. Following this meeting, Mr Chaudry and Mr D set up the following company structure:

Mr RH

Mohammad Iqbal Chaudry

Company B

(incorporated 16 February

2011)

(Sole shareholder)

Company A

(incorporated 5 May 2011)

(Declaration of Trust dated 10 February 2011)

M Nominees Ltd

(incorporated 8 February 2011)

Company C

(incorporated 8 February

2011)

(Sole shareholder)

6. Upon CFD’s instruction by RH, Mr Chaudry did not conduct any client due diligence checks beyond obtaining copies of RH’s and JH’s driving licenses and passports. Mr Chaudry did not carry out any searches of the Companies House database of disqualified directors or the bankruptcy and insolvency register.

7. Mr Chaudry did not record the terms of CFD’s retainer (including the scope of the engagement and any fee arrangements) in writing. He kept no file notes or any contemporaneous record of his dealings with RH and JH. The only evidence of the scope of CFD’s engagement is found in a deed of indemnity which was created in January 2013 and backdated to 1 July 2011.

8. Company A Limited (Company A) was initially a shell company with no trading activity. On 17 May 2011, Mr Chaudry and Mr D opened an HSBC bank account for Company A.

9. On 13 July 2011, RH informed Mr Chaudry that a sum of £400,000 was to be transferred into Company A’s bank account. Mr Chaudry asked for further details and was advised to speak to RH’s solicitor.

10. On 14 July 2011, Mr Chaudry spoke to Mr H’s solicitor about the funds that were expected to be transferred into Company A’s bank account. The solicitor confirmed that the funds were a loan to RH by Mrs HB, that the origin of the funds was her recent divorce settlement, and that he had witnessed the signature on the loan agreement. The solicitor also told Mr Chaudry that he had advised Mrs B to take legal advice on the loan agreement.

11. Mr Chaudry asked if he could be sent a copy of the loan agreement, but was told that Mrs B had taken the original document with her. Mr Chaudry was assured that a copy would be sent to him in due course. However, ultimately, Mr Chaudry never obtained a copy of the loan agreement.

12. Mr Chaudry was then instructed by RH and JH to transfer certain funds out of the Company A bank account, including £100,000 to Company C.

13. These matters were the subject of a trial in the High Court from 7 March 2016 to 11 March 2016, in which the Secretary of State sought an order that Mr Chaudry was unfit to act as a director by reason of misconduct whilst acting as a director of Company A. Norris J found that Mr Chaudry’s conduct did not warrant disqualification, but requested that a copy of his judgment be passed to CIMA for their consideration.

14. CIMA’s Professional Conduct department received a copy of the judgment of Norris J in or around December 2017. CIMA’s Professional Conduct department then wrote to Mr Chaudry requesting further information on 24 January 2018, 6 February 2018 and 21 February 2018. Mr Chaudry did not respond.

15. On 26 April 2018, CIMA wrote to Mr Chaudry to inform him that a complaint had been raised by CIMA. The CIMA Investigation Committee considered the complaint against Mr Chaudry on 30 May 2018 and found that there was a prima facie case against him. Accordingly, the Investigation Committee referred the case to the Disciplinary Committee. The Institute informed Mr Chaudry of this decision by a letter dated 31 May 2018.

16. No live evidence was called at the hearing, there being no dispute on the primary facts as contained within the papers. Mr Chaudhry’s representative did not call any evidence on behalf of Mr Chaudry, but instead relied on submissions made in writing and expanded upon orally at the hearing.

Findings of Fact

Stage 1 – Decision on Facts

17. The Committee considered with care all the documentary evidence presented, together with the submissions made by the parties. The Committee accepted the advice of the Legal Assessor.

18. The Committee noted that the background facts were largely not in dispute. The following facts relating to the Charges were admitted and found proved: 1, 2, 4, 5, 6, 7, 8, 9, 10 and 11.

19. Where the parties differed was on the question of culpability. The Defence position was that the whole case was predicated upon the basis that the retainer was between Mr Chaudry and Mr D and RH and JH, when in fact the retainer was between CFD and RJH, two legal entities, and that therefore, insofar as any duties were required to be performed, they were to be performed by CFD and not Mr Chaudry and Mr D. Obviously the Committee was only concerned with Mr Chaudry.

20. Accordingly, the first decision for the Committee was to decide whether it accepted this assertion or not. The Committee did not. If it were true it would mean every member of the Institute could seek to hide behind the corporate entity of which he or she was an employee or director and when things went wrong simply say, it was not my responsibility, it was the company’s responsibility. This approach would defeat the purpose of regulation. CIMA regulates its individual Members, not companies. CIMA’s Regulations require all members in practice, either directly, or through their partnership or company, to comply with current HMRC money laundering regulations. This is understandable and makes sense since accountants are often called upon to act in situations where companies are set up and money is involved. The Committee also noted CIMA’s Member in Practice Regulation 7.5, which states: “The requirements of council regulation 7.4 may, where appropriate, be discharged on behalf of a member in practice by his/her partnership or company, provided that, if such requirements are not so discharged, the member in practice shall remain personally liable in respect of any disciplinary proceedings arising from non-compliance.” This provided an inherent jurisdiction on the part of CIMA to be able to discipline its members in circumstances where the company may be liable but has failed to discharge its duty.

21. The Committee was satisfied that, as well as acting as a nominee director, Mr Chaudry was also acting as an accountant in respect of instructions from the Hs and in particular from Mr RH. It noted that, in his first affidavit for the High Court proceedings, Mr Chaudry said, “I am an accountant with the firm CFD Accountancy Limited. I acted as a director of the Company (Company A) from 5 May 2011 to 30 April 2012 for the only purpose of operating the Company’s administrative tasks, which for the most part consisted of dealing with the Company’s accounting operations and administrative support.” He added, “For the sake of clarity, I was not involved in the decision making aspect of the Company, being an accountant and having no knowledge of their building development.” In his evidence before the High Court, Mr Chaudry said they were paid £2,250 a month to do “all the accounting

work for them.” He was asked what he meant by “back office” tasks and he replied, “Preparing accounts, monthly and quarterly accounts; VAT returns; PAYE returns; subcontractor returns.” In his joint statement dated 4 June 2013, Mr Chaudry said, “Our firm was asked to act as nominee directors for the two companies Company B and Company C and for other companies which were incorporated around the same time and to provide back-office administration service and particularly to manage the banking arrangements and the payment of sub-contractors and other creditors.” He went on to say, “The property at Margate was acquired by Company B at the beginning of April 2011 and we were then further engaged to manage the collection of ground rents and service charges to existing apartments within the development and for future blocks which were to be built on the site.” All of this suggested rather more than “back office” tasks.

22. The Committee was satisfied that in this case there were factors which should have put Mr Chaudry on heightened alert that he would need to act with particular care. Mr RH was an undischarged bankrupt at the time that the first company was set up and Mr Chaudry was aware of this. There was also information available that RH was disqualified from acting as a company director and prohibited from forming or managing a company, for a period of six years, although Mr Chaudry did not obtain this information until a later date. In April 2011, information was available that RH had given a bankruptcy restriction undertaking for a period of five years, but again this was not something that Mr Chaudry discovered at the time. RH approached Mr Chaudry to assist in setting up a corporate structure that would hide from the public the identity of the true owner of multiple companies. Having done that, one of the companies that he had agreed to be a director of, received a significant sum of money. All these were potential “red flags” and should have alerted Mr Chaudry, as a professional chartered management accountant, to the possibility that the companies could be used to launder money. It was exactly this type of situation that the Money Laundering Regulations were designed to cover. In his second affidavit Mr Chaudry said that it was not unusual for individuals owning companies, who have been bankrupt, to request the help of accountants to add legitimacy to their board which allows them to seek credit and banking facilities. This clearly demonstrated that Mr Chaudry was aware of the way in which bankrupts might seek to use accountants. He went on to say that had he known Mr H was disqualified and subject to restrictions he would not have taken further instructions from him.

23. The Money Laundering Regulations 2007 are very specific about who is responsible under those regulations for doing certain acts. They are described as “relevant persons”. “Relevant persons” are defined as, inter alia, “external accountants”. “External accountants” are then defined as meaning a “firm or sole practitioner”. Mr Chaudry did not come under either definition, since he was not a firm nor a sole practitioner. He was not, therefore, a “relevant person” for the purposes of the Money Laundering Regulations. However, the Committee was satisfied that Mr Chaudry, by virtue of CIMA’s Member in Practice Regulations Rule 7.4(v), did have an obligation to comply with the Money Laundering Regulations notwithstanding the fact that he was not a “relevant person”. Rule 7.4(v) states that Members in practice, either directly, or through their partnership or company, are required to comply with current HMRC Money Laundering Regulations. The Committee also noted Rule 7.5 referred to above.

24. Having decided Mr Chaudry was liable to comply with the Money Laundering Regulations, the Committee considered whether there had been failures as alleged in paragraph 14(a), (b) and (c). 14(a) alleged a failure to carry out enhanced due diligence. Enhanced due diligence is required in any situation which by its nature can present a higher risk of money laundering. As stated, there were a number of what can be described as “red flags” in this case that should have alerted Mr Chaudry of the need to carry out enhanced due

diligence, namely: the fact that he knew Mr RH had been declared bankrupt; the fact that Mr H instructed him to create a structure of companies which had the effect of hiding the identity of the true owner, namely Mr H; and the receipt of £400,000 into the account of Company A, which Mr Chaudry was then instructed to make payments out to other companies in the group. Mr Chaudhry’s representative said that checks had been made with the solicitors to ensure the £400,000 was legitimate. However, this was inconsistent with the account given by Mr Chaudry in the joint statement to the Insolvency Service, where he said, “We were told that the loan was a personal one to Mr RH. Further, at no time were we involved in any discussions or meetings which suggested that the loan was being made to Company A and we are not aware of any agreements or documents entered into on behalf of the company in this respect.”

25. In all the circumstances, the Committee was satisfied that Mr Chaudry was required to carry out enhanced due diligence. The Committee accepted that Mr Chaudry had taken sufficient steps to confirm the identity of both Mr RH and Mr JH, by obtaining copies of their driving licenses and passports, but he had taken no further steps beyond that. Had he done so he would have discovered the Disqualification and Bankruptcy undertakings referred to above. The Committee therefore found Paragraph 14(a) proved.

26. With reference to Paragraph 14(b), Mr Chaudry accepted in the High Court action that nothing was put in writing. In his third affidavit he said that at the request of the solicitors for the Claimant he had looked for: file opening documents including anti-money laundering and “Know Your Client” documents; any and all emails, letters and attendance notes relating to file opening and money laundering procedures; copies of all emails, letters and attendance notes sent and received in respect of Company A and the directors of Company A, including RH. He had been unable to find any such documents. Mr Justice Norris in his judgement commented that “I think that the professional bodies will want to look at the circumstances in which two qualified accountants agreed to act as nominee directors for an undischarged bankrupt without conducting any checks into him, other than the most basic identity checks; at their failure to keep records of their dealings and their failure to record the terms of their retainer, other than to the extent disclosed by the backdated deed of indemnity …” The Committee noted the CIMA Members in Practice Regulation 7.4(ii), which requires all members in practice, either directly, or through their partnership or company, to provide written terms of engagement for all clients.

27. Mr Chaudry’s representative maintained Mr Chaudry was not liable for this failure because it was between two corporate entities, CFD and Company A. However, as the Committee has already indicated, it finds Mr Chaudry liable on an individual basis under CIMA’s Regulations and therefore found this part proved.

28. With reference to Paragraph 14(c), there was no evidence that there were any appropriate risk-sensitive policies and procedures relating to record keeping and that was demonstrated by the complete, admitted, absence of any such records. For the same reasons as referred to above, the Committee was satisfied that Mr Chaudry was liable under CIMA’s Regulations for this failure and therefore found this part proved.

29. The Committee thus found all the facts proved in Paragraphs 1 to 14 inclusive.

Stage 2 – Decision on Misconduct

30. The facts having been proved, the Committee considered the matter of misconduct. CIMA’s Byelaws and Regulations define "misconduct'' as “failure to comply with the Laws of the Institute”; or “conduct resulting in any conviction (or adverse finding by, or sanction or order of, or undertaking to, any tribunal or court or other body or authority) relevant to their membership or registration with the Institute.

31. In relation to the Charges, the Committee noted Mr Chaudry’s admissions that Charge 1(a), and Charge 2(a) amounted to misconduct and it took this into account when reaching its own decision on misconduct. Mr Chaudry did not admit that his actions in relation to 3(a) amounted to misconduct, nor did he accept that any of his behaviour, as reflected in charges 1(b), 2(b) and 3(b) adversely affected the reputation of the profession. The Committee made the following findings.

Charge 1 - Failure to conduct appropriate client due diligence

32. The Committee first considered whether Mr Chaudry had failed to comply with the Laws

of the Institute by breaching the fundamental principle of Professional Behaviour (Sections 100.5(e) and 150.1) of the Code of Ethics (October 2010 version) because:

(a) You (as beneficial owner and director of CFD) failed to comply with Regulation 14 of the Money Laundering Regulations 2007, which are "relevant laws and regulations" for the purposes of Section 150.1 of the Code of Ethics (October 2010 version).

(b) A reasonable and informed third party, weighing all the specific facts and circumstances available to you at the time, would conclude that the actions set out at paragraphs 10 and 12 above adversely affect the good reputation of the profession.

33. Section 100.5(e) states that a professional accountant shall comply with the fundamental principle of professional behaviour, which is to comply with relevant laws and regulations and avoid any action that discredits the profession.

34. Section 150.1 states: The principle of professional behaviour imposes an obligation on all professional accountants to comply with relevant laws and regulations and avoid any action that the professional accountant knows or should know may discredit the profession. This includes actions that a reasonable and informed third party, weighing all the specific facts and circumstances available to the professional accountant at that time, would be likely to conclude adversely affects the good reputation of the profession.

35. The Committee had already found as a matter of fact that Mr Chaudry had failed to comply with Regulation 14 of the Money Laundering Regulations 2007. The Committee thus went on to consider whether a reasonable and informed third party, weighing all the specific facts and circumstances available to Mr Chaudry at the time, would conclude that the actions set out at paragraphs 10 and 12 above adversely affected the good reputation of the profession. To this end, the Committee had regard to the comments of Mr Justice Norris, who said:

“There is no dispute that Mr H was on 13 and 14 July acting in the administration of the company by directing receipt of the loan and by directing its disbursement. At this stage Mr Chaudry and Mr D who had up until then made no checks beyond a driving licence and passport check on Mr H knew that Mr H had been made bankrupt. They assumed – or at least Mr Chaudry assumed; it is not clear Mr D did – that Mr H had been discharged from bankruptcy some time in May. They could see that Mr H was arranging himself to borrow and then to on-lend to Company A £400,000. The terms of the loan to Company A were entirely unspecific and unrecorded. The monies were received directly from a third party. Although Mr Chaudry or Mr D checked with Mr H’s solicitors the promise agreement never arrived. Whether Company A should be borrowing at all and if so how it was to repay any lending was entirely unclear. They proceeded on the instructions of Mr H to make payments to other group companies, presumably by way of intercompany loan, though these transactions themselves were entirely on unstated terms. It seems to me to have been a plain breach of duty to the company to receive in and immediately disburse on behalf of the company these monies in that state of ignorance. But accepting and disbursing money on unstated terms is not an act of which the Secretary of State complains of itself, but it provides the context for the complaint that a reasonably diligent director with the general skills to be expected of those accepting that office and the actual skills and experience of qualified accountants ought to have checked on the capacity of a former bankrupt to lend to the company and to direct disbursement of funds received by the company. I agree with the Secretary of State that it was a careless breach of duty not to check before embarking upon what was the fulfilment of their intended role, namely to execute transactions negotiated by Mr H through the administrative services of themselves as directors and of CFD as accountants. In my judgment they ought as competent directors who were qualified accountants to have taken the simple and inexpensive steps of checking on Mr H’s capacity to act in view of the fact that they were wholly reliant upon Mr H; and however plausible he was, the whole point of checking and of “due diligence” is to test the plausibility of clients. They had conducted no previous checks at all. They ought to have been on a heightened state of alert, having regard to the corporate structure which Mr H had put in place and the nature of what they were being asked to do.”

36. Whilst reaching its own decision, the Committee adopted and echoed the comments of Mr Justice Norris and was in no doubt that a reasonable and well informed third party would conclude that Mr Chaudry’s actions adversely affected the good reputation of the profession.

37. The Committee had already found that Mr Chaudry’s actions amounted to a failure to comply with Rule 7.4 (v) of the Member in Practice Regulations, which required him to comply with current HMRC Money Laundering Regulations.

38. The Committee then considered whether Mr Chaudry had failed to comply with Section 210.3 of the Code of Ethics (October 2010 version). Section 210.3 states: “A professional accountant in public practice shall evaluate the significance of any threats and apply safeguards when necessary to eliminate them or reduce them to an acceptable level. Examples of such safeguards include: Obtaining knowledge and understanding of the client, its owners, managers and those responsible for its governance and business activities; or securing the client’s commitment to improve corporate governance practices or internal controls.”

39. The Committee was satisfied that there was such a failure in this case. There was no evidence, beyond the obtaining of copies of driving licenses and passports, of any evaluation of any threats and no evidence of any other safeguards to reduce the level of any threats. The threats were very real in this case because had Mr Chaudry conducted proper checks he would have discovered that RH had made the undertaking that he would not, without the leave of the court, be a director of a company or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company. Mr H. was clearly in breach of that undertaking by forming the company structure referred to above, and as decided by Mr Justice Norris in the High Court trial.

40. Having found all the failures as alleged in Charge 1 to be made out, the Committee was in no doubt that Mr Chaudry’s actions and omissions amounted to misconduct.

Charge 2 - Failure to record the terms of your retainer

41. Mr Chaudry admitted that he failed to record the terms of the retainer. Mr Chaudry’s representative argued that he was not culpable, however, because it was the responsibility of CFD to record the retainer, not Mr Chaudry. The Committee had already rejected that argument. Rule 7.4(ii) of the Member in Practice Regulations (September 210 version) states that: Members in practice, either directly, or through their partnership or company are required to provide written terms of engagement for all clients. For the reasons referred to in its findings on the facts, Mr Chaudry could not seek to hide behind the corporate structure to avoid his responsibilities in this regard. Furthermore, even if the Committee was wrong about that, Rule 7.5 makes it clear that where a requirement is not discharged by the company, the member in practice shall remain personally liable in respect of any disciplinary proceedings arising from non-compliance.

42. The Committee was satisfied that a reasonable and informed third party, weighing all the specific facts and circumstances available to Mr Chaudry at the time, would conclude that the failure to record the terms of the retainer adversely affected the good reputation of the profession. This whole enterprise should have raised suspicions in the mind of Mr Chaudry and he was not assisted by the complete lack of any records, apart from the deed of indemnity which was created in January 2013 and backdated to 1 July 2011, relating to his involvement with RH and JH.

43. Having found all the failures as alleged in Charge 2 to be made out, the Committee was in no doubt that Mr Chaudry’s omission amounted to misconduct.

Charge 3 - Failure to keep sufficient records of client instructions and communications

44. Reference has already been made to the complete lack of documentation of client instructions and communications in this case and Mr Chaudry has admitted that on checking all his sources of records he could find none relating to his involvement with the Hs. For the same reasons as referred to above, the Committee found Mr Chaudry was responsible for this failure and that it adversely affected the good reputation of the profession.

45. Having found all the failures as alleged in Charge 3 to be made out, the Committee was in no doubt that Mr Chaudry’s omissions amounted to misconduct. As already reflected in its

findings of facts, the Committee was satisfied that there had been a breach of Regulation 19 and that Mr Chaudry’s conduct clearly affected the reputation of the profession.

46. Mr Chaudry’s status as a member of CIMA carried a legitimate expectation and an obligation to comply with the Rules. All members agree to adhere to the CIMA Rules, Regulations and ByeLaws and accept that they may be subject to disciplinary action if they fail to do so. The Committee took the view that Mr Chaudry’s failure to uphold the high standards expected of CIMA members amounted to a serious falling short of his professional duties and obligations. The Committee was satisfied that his acts and omissions had the potential to seriously undermine public trust and confidence in the profession and therefore bring the profession into disrepute. In these circumstances, the Committee concluded that Mr Chaudry’s acts and omissions in charges 1 to 3, whether considered individually or collectively, were sufficiently serious to amount to misconduct.

Stage 3 - Mitigation and Sanction 47. Having found misconduct as alleged the Committee went on to consider the questions of

mitigation and sanction. In considering what sanction, if any, to impose, the Committee had regard to the Indicative Sanctions Guidance and to the advice of the Legal Assessor. It also had regard to the principle of proportionality and that the sanction imposed should be the least onerous suitable to reflect the seriousness of the misconduct.

48. The Committee considered the following aggravating features: Mr Chaudry was in a very senior position; the conduct was planned and went on for some time; the Committee took into account the potential for serious harm by Mr Chaudry in lending his name without enhanced checks to an enterprise of which he appeared to know little, despite there being warning signs that should have alerted him to the potential danger; a lack of insight; no evidence of remorse; severe detriment to CIMA’s reputation; he was brought in to add legitimacy to the enterprise and he allowed himself to do so; his conduct was intended for gain, he was paid for his role.

49. The Committee considered the following mitigation: no previous disciplinary complaints; he cooperated with CIMA’s investigation and provided documentation.

50. The Committee considered all the options available from the least serious upwards. The Committee did not think it appropriate to take no further action, admonish or reprimand in a case where a professional accountant and member of CIMA had failed to comply with Money Laundering Regulations specifically designed to prevent criminal activity. Mr H had provided the Disqualification Undertaking and the Bankruptcy Undertaking not to be involved in the promotion, formation or management of a company, because he was not fit to do so. Mr H would not have been able to set up his company structure without the assistance of an accountant who was prepared to flout the Money Laundering Regulations. It was clear on the evidence that Mr Chaudry had been brought in to add legitimacy to the enterprise and to assist in hiding the true identity to the person at the head of the corporate structure. The Committee considered this behaviour to be extremely serious.

51. The Committee then considered whether a severe reprimand would adequately reflect the seriousness of the case. The guidance indicates that a reprimand is appropriate where the conduct is of a minor nature and there is no continuing risk to the public. A severe reprimand is said to be similar to, but considered to be more severe, than a reprimand. As already indicated, the Committee was of the view that Mr Chaudry’s behaviour was extremely

serious. Furthermore, given his lack of insight into the seriousness of his behaviour and the impact of that behaviour on the reputation of the profession, the Committee considered Mr Chaudry represented a continuing risk to the public. In such circumstances the Committee did not consider a severe reprimand, or conditions imposed on his registration, would be appropriate or proportionate and, given the continuing risk the Committee did not consider suspension would adequately reflect the seriousness of the misconduct.

52. In all the circumstances, and following CIMA’s guidance, the Committee concluded that the only appropriate and proportionate sanction was expulsion from membership of the Institute. Mr Chaudry’s conduct was fundamentally incompatible with membership of CIMA. The Committee was satisfied that the only means of protecting the public was to remove Mr Chaudry from the Register. His conduct was such a serious breach of bye-law 1 that no other sanction would adequately reflect the gravity of his offending behaviour.

53. The Committee also considered that a failure to remove a member from the register who had behaved as Mr Chaudry had behaved, would seriously undermine public confidence in the profession and in CIMA as its regulator. In order to maintain public confidence and uphold proper standards in the profession it was necessary to send out a clear message that this sort of behaviour falls far below the standard expected of a member of the profession and is not to be tolerated.

54. The Committee therefore ordered that Mr Chaudry be expelled from membership of the Institute.

Stage 4 - Costs 55. CIMA made an application for costs of £21,450 served on the Respondent on 27 June

2019. The Respondent declined to provide the Committee with evidence of his means in relation to being able to pay a costs order. Mr Chaudhry’s representative did, however, contend that the costs requested were not reasonable or proportionate. He submitted that the case was a straightforward document-based case and should to have taken as long as it did to prepare. He also submitted that some of the preparation time was taken up with making amendments to the charges as a result of submissions made by the Respondent and that it was not right that Mr Chaudry pay for such costs. The Committee took account of all of this information.

56. In the circumstances the Committee was satisfied that the costs requested by CIMA were reasonable and proportionate, save for the time estimate for today which, in the event, took less than a full day. The Committee therefore determined that costs in the sum of £20,000 be ordered against the Respondent.