Audit Failures at Liberty Commodities Set Precedent for Global AML Compliance
The UK Financial Reporting Council has imposed sanctions on HW Fisher and lead auditor Simon Mott-Cowan for significant audit failures at Liberty Commodities, a subsidiary of the GFG Alliance. The regulator determined that the firm lacked professional scepticism regarding the entity’s reliance on controversial financing from Greensill Capital, establishing a new benchmark for assessing supply chain finance models.
The Mechanics of the Audit Collapse
Liberty Commodities operated as a UK-registered company involved in trading non-ferrous metals and steelmaking raw materials before facing insolvency proceedings in March 2021. The firm utilized a back-to-back trading model, purchasing materials from suppliers only after agreeing to sell them onward to customers. This structure relied heavily on supply chain finance facilities provided by Greensill Capital UK and Wyelands Bank to fund commodity trading transactions.
The audit for the financial year ended 31 March 2020 failed its principal objective to obtain reasonable assurance that financial statements were free from material misstatement. According to the Financial Reporting Council, the issues stemmed from a pervasive and fundamental lack of professional scepticism across seven key audit areas. These critical domains included revenue recognition, asset derecognition, recoverability of trade debtors, intercompany balances, journal testing, and going concern assessments.
The regulator found that the auditors did not adequately identify risks arising from Liberty Commodities’ business model or assess the company’s obligations under relevant finance agreements. They failed to comprehend the consequences of financial arrangements with Greensill and Wyelands Bank for areas including asset derecognition and going concern. Andrew Twomey, the FRC acting deputy executive counsel, stated that HW Fisher and Mr Mott-Cowan failed to respond appropriately to obvious risks, including the potential withdrawal of Greensill financing facilities despite growing public scrutiny.
The investigation noted that the lapses were not intentional, dishonest, deliberate or reckless. However, the catch is that the failure to understand the entity’s environment undermined the ultimate performance of the audit as a whole. The FRC emphasized the importance of auditors understanding how failures in this area can compromise the integrity of financial reporting.
The GFG Alliance Network and Financial Fallout
Liberty Steel Group Holdings UK Ltd, also known as Liberty House or Liberty House UK, is a British industrial and metals company founded in 1992 by industrialist Sanjeev Gupta. The holding company of Liberty Steel, Liberty House Group PTE Ltd, was listed on the Singapore Exchange (SGX-ST) until its delisting in September 2023 due to financial irregularities.
The scandal involved Greensill Capital, which collapsed in 2021 after being exposed through its ties to Gupta’s GFG Alliance. The UK Insolvency Service banned the founder, Lex Greensill, from serving as a company director for nine years in June following the collapse. Wyelands Bank, another entity within the GFG Alliance, was also implicated; PwC was fined over £4.5m in March 2025 for its audits of Wyelands Bank.
The mechanics here reveal how a lack of scrutiny on one part of a complex corporate network can trigger systemic failures across multiple jurisdictions. The FRC’s probe, opened in February 2022, highlighted that the auditors failed to grasp the risks associated with the broader GFG Alliance structure.
Numbers and Precedents Set by the Sanctions
The regulator fined HW Fisher LLP £200,000 for serious professional failures. This amount was reduced to £140,000 on admission of the breaches. The firm formally failed to meet the requirements set by the Financial Reporting Council.
Simon Mott-Cowan faced a fine of £25,000, which was reduced to £17,500 upon his admission. During the investigation, he voluntarily ceased his audit practice and will no longer act as a responsible individual or undertake audit work. The FRC declared that he failed to meet the requirements.
These sanctions set a significant precedent for auditors managing complex supply chain finance arrangements. The case serves as a warning that auditors must rigorously assess the viability of financing partners and the sustainability of back-to-back trading models, even when those partners are part of a larger corporate alliance. As noted by Andrew Twomey, the failure to comprehend and respond appropriately to obvious risks can lead to severe regulatory consequences.
The investigation underscores that professional scepticism is not merely a procedural checkbox but a fundamental requirement for maintaining market confidence. With HW Fisher having merged with Sumer in October 2024 while retaining its independent brand name, these sanctions predate the merger, yet they highlight ongoing scrutiny of the firm’s legacy practices. The case illustrates how regulatory bodies are increasingly holding auditors accountable for failing to see red flags that were visible in the media at the time of the audit.
The Broader Implications for Corporate Governance
The sanctions against HW Fisher and Simon Mott-Cowan highlight the critical importance of understanding the broader corporate environment when auditing complex entities like Liberty Commodities. The Financial Reporting Council emphasized that failures in comprehending an entity’s relationships can undermine the entire audit process, regardless of whether lapses were intentional or reckless.
This case serves as a stark reminder for auditors managing supply chain finance arrangements within large alliances such as the GFG Alliance. The regulator noted that public scrutiny regarding Greensill Capital’s exposure to Gupta’s group was already present in the media during the audit period. Despite this, the auditors failed to respond appropriately to obvious risks, including the potential withdrawal of financing facilities.
The investigation also revealed that Wyelands Bank, another entity within the GFG Alliance, faced similar scrutiny, with PwC fined over £4.5m in March 2025 for its audits of the bank. These interconnected failures demonstrate how a lack of scrutiny on one part of a corporate network can trigger systemic issues across multiple jurisdictions.
Sources
- Liberty Steel Group
- HW Fisher fined by UK FRC over Liberty Commodities audit
- HW Fisher sanctioned over GFG Alliance audit lapses
Photo: Wikimedia Commons (Public domain)
