Monday 31 August 2026
Your weekly SQE Prep Quiz has arrived
Dear Subscriber,
Hope you had a great weekend. Please see below for the question, the answer to the previous question and associated resources. This is the web version of this newsletter.
NEW: I will be holding a live FLK Contract Law SQE Super Session on 19 September. 30 Places available upon application. If you would like to join, fill in the no commitment expression of interest form on http://events.dryannis.co.uk/
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This Week’s Question: A solicitors’ firm fails to obtain replacement qualifying professional indemnity insurance before its existing policy expires. It also fails to secure replacement insurance during the subsequent extended policy period and therefore enters the cessation period. The firm has several ongoing conveyancing matters approaching completion and is also approached by a new client seeking urgent advice. The partners hope to continue operating while searching for replacement insurance. Which of the following best describes what the firm may do during the cessation period?
A. It may continue all existing matters and accept new instructions provided clients are informed that replacement insurance is still being sought.
B. It may continue existing matters without restriction but must not accept new instructions until qualifying professional indemnity insurance has been obtained.
C. It may undertake only work necessary to discharge obligations arising from existing instructions and must not accept new private practice instructions.
D. It must immediately stop all legal work, including work required to protect the interests of clients whose instructions were accepted before the cessation period.
E. It may continue existing and new matters during the cessation period because its previous insurer remains responsible for all professional liabilities during that period.
Dig Deeper: Want to know more about the role of courts and lawyers? Watch https://youtu.be/hlaj2AmrKgY
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Last Week’s Question: A solicitor acts for a company purchasing a commercial property. Shortly before completion, the director asks to substitute the purchase funds with money from an unrelated overseas company. The director gives no convincing commercial explanation for the change and becomes evasive when asked about the source of the funds. The solicitor suspects that the money may represent the proceeds of crime. The transaction falls within the regulated sector. Which of the following is the most appropriate action for the solicitor to take?
A. Continue with the transaction because suspicion alone is insufficient unless the solicitor can prove that the money represents criminal property.
B. Tell the director that a suspicious activity report will be made and suspend the transaction until the director provides satisfactory evidence.
C. Report the suspicion through the firm’s appropriate internal procedure so that a suspicious activity report can be considered, while avoiding any disclosure that could prejudice an investigation.
D. Immediately terminate the retainer and inform the police directly that the director is probably engaged in money laundering.
E. Continue acting but place the disputed funds in the firm’s client account until the National Crime Agency confirms whether they are criminal property.
Correct answer: C. Report the suspicion through the firm’s appropriate internal procedure so that a suspicious activity report can be considered, while avoiding any disclosure that could prejudice an investigation. Feedback: Money laundering is expressly included within FLK1 Legal Services, including the circumstances in which suspicion should be reported, the person or body to whom it should be reported, and the procedure that should be followed. Under the Proceeds of Crime Act 2002, a person working in the regulated sector may commit an offence by failing to make the required disclosure where they know or suspect, or have reasonable grounds for knowing or suspecting, that another person is engaged in money laundering. The solicitor does not need proof that the funds are criminal property before the reporting obligations can arise. The SRA confirms that a suspicious activity report may be required where there is knowledge, suspicion or reasonable grounds for suspicion of money laundering.
In a firm, the solicitor would normally make an internal disclosure to the firm’s Money Laundering Reporting Officer (MLRO) in accordance with the firm’s procedures. The MLRO then determines whether a suspicious activity report should be submitted to the National Crime Agency (NCA). The SRA specifically states that where a firm suspects it is being used to launder money, its MLRO must submit an appropriate SAR to the NCA. The solicitor must also be careful not to alert the client in a way that could prejudice an investigation. Section 333A POCA 2002 creates the offence commonly known as tipping off within the regulated sector. Telling the director that a SAR is being made could therefore create a separate legal problem. The other options are incorrect because:
A is incorrect because the reporting regime operates on knowledge or suspicion, not proof beyond reasonable doubt.
B is incorrect because expressly telling the client that a SAR is being made risks tipping off.
D is incorrect because the usual procedure is an internal report to the MLRO and, where appropriate, a SAR to the NCA; immediate direct reporting to the police is not the normal statutory process described.
E is incorrect because placing suspicious funds into the client account does not solve the AML issue and could involve the solicitor or firm more directly in dealing with potentially criminal property.
SQE1 takeaway: A solicitor does not need proof of money laundering before the reporting regime is engaged. Once the relevant level of suspicion arises, the correct reporting procedure must be followed, while care must be taken not to tip off the client.
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All the best
Dr Ioannis (Yannis) Glinavos
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