Deposit not insured

Tenancy Deposits

My wife and I jointly own a flat in Morden and My wife was managing. We had a tenant from August 2017 to May 2020 and he left for Poland. The deposit was returned in full. My wife insured the deposit only in March 2020. The tenants lawyers are seeking compensation in the sum of £34000.00 using Section 213 of the housing act.
My questions are as follows;

Can the sections 213 and 214 applied when the deposit is fully returned ? It states that “must order to return the deposit and apply a penalty “.

The tenancy contract states that landlord must insure within 14 days if not tenant should contact the landlord and obtain the certificate. Until March 2020 tenant never raised this issue. Can he go to courts with this negligence?

Tenant always paid the rent through the agent in cash. We deposited in the bank and fully declared to HMRC. Tenant likely to have not paid the taxes. Can complaining to HMRC and involving them helpful should the tenants lawyers decide to go to courts?

What are implications of tenant not living in the UK now?