The five most common breaches that get UK Insolvency Practitioners sanctioned

Across more than 200 disciplinary records from the Insolvency Practitioners Association (IPA), ICAEW and ICAS, a handful of failings appear again and again. Some are technical — missed filings, sloppy paperwork — but many cut closer to the bone: failures to police money-laundering, failures to investigate director misconduct, failures to give debtors honest advice. The pattern matters, because if you are a creditor, a debtor entering an IVA, or a director whose company has just gone into liquidation, these are precisely the corners where the Insolvency Practitioner (IP) appointed to your case is most likely to cut.

Below are the five most-cited categories of breach in the corpus, what is actually going wrong in each, and what good practice looks like.

1. Anti–Money Laundering (AML) and Customer Due Diligence failures

What's going wrong. This is the single most prolific category. The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) require an IP to verify who they are dealing with before establishing a business relationship or accepting funds. Regulations 27 and 28 deal with customer due diligence (CDD); Regulation 30 deals with the timing of verification; and where the case is high-risk, enhanced due diligence is required. Separately, sections 330 and 331 of the Proceeds of Crime Act 2002 (POCA) require an IP who has reasonable grounds to suspect money laundering to file a Suspicious Activity Report (SAR) — internally with their firm's Money Laundering Reporting Officer (MLRO), and where appropriate externally with the National Crime Agency (NCA).

The corpus shows IPs repeatedly: taking on liquidation or IVA appointments without verifying the director's or debtor's identity; failing to re-assess risk when new information emerged; not carrying out enhanced due diligence on cases flagged high-risk; and — most seriously — failing to report suspicions of director misconduct, bounce back loan fraud or other criminal activity to the MLRO or the NCA at all.

Illustrative example. In one cluster of cases, an IP took multiple liquidation appointments over several years without onboarding checks on the directors, and on cases assessed as high-risk failed to apply enhanced due diligence. Aggravating the position, the IP was also the firm's MLRO — the very person who should have known better. Penalties in this category typically run from £5,000 to £10,000 plus a severe reprimand, with the MLRO role itself routinely treated as an aggravating factor.

2. Late, missing or defective progress reports and statutory filings

What's going wrong. Rules 18.6(4), 18.7(6) and 18.8(5) of the Insolvency (England and Wales) Rules 2016 require IPs to deliver progress reports — to creditors, members and the Registrar of Companies — within two months of each reporting period end. Section 109(1) of the Insolvency Act 1986 governs notification of appointment. Rules 14.28 and 14.29 govern notices of intention to declare a dividend.

In the corpus, several practitioners have been sanctioned for failing to file dozens — in the worst cases, several hundred — progress reports across portfolios of cases. One case involved no less than 260 progress reports; another, 335 separate filing failures across 164 voluntary liquidations. The point is not that one report slipped; it is that systemic case-management or supervision was absent.

Illustrative example. A recurring pattern involves an IP whose firm experienced a merger, a partnership break-up or a staffing crisis. Reports stop being filed. The IP fails to notify their regulator. Years later, an inspection visit reveals tens of cases that have not had a progress report delivered to Companies House on time, or at all. The sanction is almost always a severe reprimand and a fine in the £5,000–£8,000 range, with the volume of failures and any failure to self-report treated as aggravating.

3. Inadequate investigation of director and company conduct (SIP 2 / CDDA 1986)

What's going wrong. Statement of Insolvency Practice 2 (SIP 2) requires the office-holder to carry out proportionate investigations into the affairs of the insolvent entity and its directors, and — critically — to document those investigations. Paragraph 4 requires the investigation to be proportionate; paragraph 8 requires enquiry into prior transactions that may give rise to recovery; paragraph 18 requires that initial assessments, the scope of work and the conclusions reached are properly recorded. Section 7A of the Company Directors Disqualification Act 1986 (CDDA) then requires the office-holder to file a conduct report on each director with the Insolvency Service's Director Conduct Reporting Service (DCRS) within three months of appointment, and to update that report when new material evidence emerges.

The corpus is full of cases where IPs treated investigation as a box-ticking exercise: no documentation of decisions; no enquiry into antecedent transactions; conduct reports submitted late, not at all, or — worse — submitted in a form that was materially misleading; and a failure to update the DCRS once new evidence (such as Bounce Back Loan misuse) surfaced. Several of these matters intersect with category 1, because evidence of director misconduct should also have triggered a SAR.

Illustrative example. A recurring pattern involves an IP taking on a Creditors' Voluntary Liquidation following Covid-era trading. The directors had drawn down a Bounce Back Loan on overstated turnover and used it to pay personal debts. The IP files a routine conduct report, fails to flag the loan abuse, and does not report the suspicion to the MLRO. Sanctions in such cases typically combine a severe reprimand with fines that can exceed £10,000, particularly where the IP was a senior figure in the firm.

4. Poor handling of IVAs, Debt Relief Orders and vulnerable debtor advice (SIP 3.1)

What's going wrong. SIP 3.1 governs Individual Voluntary Arrangements. It requires the IP, before recommending an IVA, to: assess affordability through proper income and expenditure reviews (paragraph 16); ensure the proposal has a reasonable prospect of approval and implementation (also reflected in section 256A(3) of the Insolvency Act 1986); and give the debtor appropriate, accurate advice including signposting alternative remedies such as a Debt Relief Order (DRO) where appropriate (paragraph 18(a) of the 2023 SIP 3.1).

The corpus shows persistent problems at three points in the IVA lifecycle. First, advice: staff working under an IP's licence telling debtors — sometimes vulnerable debtors — incorrect or misleading things, including wrongly telling debtors they were ineligible for a DRO. Second, certification: IPs signing off proposals as having a reasonable prospect of success when, on the information available, no such conclusion could properly be reached. Third, administration and closure: failures to act on missed payments, to record creditor votes properly, to close IVAs promptly once the debtor had paid in full, or to vary the IVA properly before changing its terms. A separate strand involves IPs paying for the introduction of IVA appointments in breach of R340.4 of the Insolvency Code of Ethics, which prohibits referral incentives that compromise objectivity.

Illustrative example. In one matter, an IP allowed staff conducting initial advice calls to give misleading or factually incorrect information across multiple cases, including to a vulnerable debtor — and in some calls failed to correct a debtor's own misunderstanding. The combination of professional competence and professional behaviour breaches attracted a severe reprimand and a five-figure fine, plus conditions on future advertising and supervision.

5. Drawing unauthorised or excessive remuneration, and mishandling estate funds (SIP 11)

What's going wrong. Two related failings appear repeatedly. The first is taking fees the IP was not entitled to take: drawing remuneration before fees were properly approved, using the wrong creditor body to authorise fees, applying the wrong percentage, recharging bond costs that had not been incurred, or — in more serious cases — drawing fees that, on review, were unreasonable or excessive in relation to time properly chargeable. The second is the handling of estate money. SIP 11 requires that estate money, client money and the IP's own firm money are clearly differentiated and held in accounts where each estate's funds are readily identifiable. Regulation 13(1) of the Insolvency Practitioners Regulations 2005 requires sufficient records to show and explain the administration of each case.

The corpus shows IPs commingling estate funds across dozens of IVAs, giving non-licensed staff or directors unfettered access to estate bank accounts, recharging bond costs not actually paid, and — in the most serious instance recorded — drawing several hundred thousand pounds in fees from two liquidations that on later review were found to be unreasonable, leading to a court-supervised repayment.

Illustrative example. A recurring pattern involves an IP who recharges a "bond cost" against the estate when no bond payment was actually made, withdraws those funds, and only addresses the issue once a regulatory inspection identifies it. Sanctions typically combine a severe reprimand with fines of £5,000–£8,000, plus repayment.

What good looks like

For consumers wondering how to recognise a properly run case, the markers of a competent IP are mostly the inverse of the failings above:

Verification before engagement. A good IP completes CDD on the directors or debtor — and any third-party funder — before establishing the business relationship and before accepting any money, and reassesses risk when new information emerges.
Timely, on-the-record reporting. Annual progress reports go to creditors, members and the Registrar of Companies within the two-month statutory window, every time. If they slip, the IP self-reports.
Documented investigations. SIP 2 work is proportionate, recorded, and revisited when new evidence arrives. Conduct reports to the Insolvency Service are accurate, on time, and updated when material new information surfaces. Suspicions of criminality are reported internally to the MLRO and, where appropriate, onward to the NCA.
Honest debtor advice. IVA proposals are only certified when there is a genuine prospect of success. Vulnerable debtors are signposted to alternatives such as DROs where appropriate. Variations are only put to creditors after a proper affordability review.
Clean money handling. Estate funds sit in segregated, identifiable accounts. Fees are drawn only with the correct authority, at the correct rate, after proper notice. Bond costs are charged only if actually incurred.

None of this is exotic — it is the baseline of competent practice. The disciplinary record simply shows what happens when it is missing.