PwC fined £2.9m over audit failures at Gupta’s Wyelands Bank

The Financial Reporting Council (FRC) has fined PwC £2.9 million and issued a severe reprimand over “serious failings” in its 2019 audit of Wyelands Bank, the now-defunct lender owned by steel magnate Sanjeev Gupta.

The penalty, originally set at £4.5 million, was reduced due to PwC’s admissions and what the regulator described as “exceptional cooperation” during the investigation.

The audit, signed off in July 2019, failed to properly assess significant risks relating to Wyelands’ exposure to related parties within Gupta’s GFG Alliance, a sprawling industrial group under separate investigation by the Serious Fraud Office.

The audit partner responsible, Jonathan Hinchliffe, was also fined £33,412 (reduced from £55,000) and received a severe reprimand. Hinchliffe has since left the firm and declined to comment.

FRC: Multiple Audit Failures and Missed Red Flags

The FRC identified breaches in six key areas of PwC’s 2019 audit: risk assessment, compliance with laws and regulations, related party transactions, going concern assessment, loans and advances, and expected credit loss provisions.

In its statement, the regulator said:

“The audit team failed to properly understand the bank’s lending activities and adequately consider the risks posed by its actual and potential exposure to related parties in the GFG Alliance.”

Notably, the FRC pointed to the audit team’s failure to respond to prior warnings from the Prudential Regulation Authority (PRA), which had raised concerns about Wyelands’ related party lending and concentration of risk.

By September 2019, the PRA had ordered Wyelands to limit its related-party exposure; six months later, the bank ceased new lending and began winding down operations.

By April 2019, Wyelands held £727 million in deposits from more than 15,000 UK savers, with 84% of its business introduced by GFG-related companies.

The FRC has made clear that while PwC’s audit shortcomings were serious, they are not alleged to have caused the bank’s closure.

PwC Responds to Ruling

In response, PwC acknowledged its failings:

“We acknowledge and apologise that aspects of this piece of work fell short of the required standards. Since 2019 we have undertaken a multi-year programme to enhance audit quality… Audit quality remains our top priority.”

The firm has also agreed to cover the FRC’s investigative costs.

Sector-Wide Implications

This is the latest in a series of enforcement actions from the FRC as it continues its scrutiny of audit work involving high-risk companies and complex ownership structures.

The case underscores the importance of robust auditor scepticism, particularly when a bank is heavily reliant on related-party transactions.

Claudia Mortimore, deputy executive counsel at the FRC, said:

“The audit breaches in this case highlight the importance for auditors to have a full understanding of the audited entity and its business. This is particularly important where there has been a change of ownership and change in the nature and scale of activities.”

Wyelands was part of the GFG Alliance, Gupta’s global network of businesses across metals, energy, and finance. It became one of the largest clients of Greensill Capital, which collapsed in 2021 amid questions over its exposure to Gupta-linked companies.

While the FRC stopped short of drawing a direct line between PwC’s audit failures and Wyelands’ closure, the case adds further weight to calls for reform in UK audit standards and oversight of complex group structures—particularly where retail depositors and financial stability are at stake.