The regulator has decided not to enforce a £120,000 fine because the London firm which was liable has gone into administration.
The Solicitors Regulation Authority said there were exceptional circumstances in the public interest to reduce the financial penalty levied against the UK arm of US-based Armstrong Teasdale to zero.
The firm, which went into administration last September, had acquired Kerman Legal Services in February 2021 during a period of expansion.
Four months later, the SRA commissioned a forensic investigation into what had been happening at Kermans, and found that payments had been made for more than two years from the client account in relation to two clients which did not appear to relate to any legal transaction.
The payments had been requested by a director and owner at Kermans but were authorised by several managers and even continued after the firm was acquired.
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Overall, the SRA found that the firm caused or allowed its client account to be used as a banking facility on 20 separate payments.
It was ruled there had been a failure in systems and processes at the firm which had failed to prevent the client account being misused.
In mitigation, there was no evidence of lasting harm to consumers or third parties and there was no allegation that the firm or any of its members had acted dishonestly or without integrity. The firm had also taken remedial action.
The fine was set at between 1.6% and 3.2% and reduced by 30% to take account of mitigating factors.
The SRA said that Armstrong Teasdale administrators suggest that it will no longer trade and will cease to exist with no distribution to unsecured creditors. The firm would not therefore pay the financial penalty.
The former owner of Kermans, Anthony Kerman, has already been fined around £35,000 for allowing a client’s request to withdraw money from the client account to pay credit card bills and buy jewellery.
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