SQE1 money laundering: what you must know and how it is tested
SQE1 money laundering questions test the offences in the Proceeds of Crime Act 2002, when a solicitor must report, and what they must not tell the client. Suspicion triggers the duties, and tipping off is a trap. Read it with the wider Legal Services guide.
The rules to apply
Principal offences under the Proceeds of Crime Act 2002: concealing, disguising, converting, transferring or removing criminal property (s327); entering into or becoming concerned in an arrangement which you know or suspect facilitates the acquisition, retention, use or control of criminal property (s328); and acquiring, using or possessing criminal property (s329). It is a defence to make an authorised disclosure to the National Crime Agency (a defence against money laundering request) before doing the act and to get consent, or to have a reasonable excuse for not disclosing.
Failure to disclose (s330) applies in the regulated sector. It is committed by a person who knows or suspects, or has reasonable grounds to know or suspect, money laundering and does not report it as soon as practicable. Employees report internally to the firm's nominated officer (the MLRO), who decides whether to report to the NCA. Tipping off (s333A) is disclosing that a report has been made, or that an investigation is under way, if it is likely to prejudice it. Prejudicing an investigation (s342) is a separate offence. Suspicion means more than speculation and is not the same as proof.
Under the Money Laundering Regulations 2017, firms that do regulated work, such as buying and selling property or businesses, managing client money or forming companies and trusts, must have a firm wide risk assessment, written controls, customer due diligence (identity, beneficial ownership, purpose), enhanced due diligence for higher risk matters such as politically exposed persons, ongoing monitoring, training and records kept for five years after the end of the relationship. Legal professional privilege protects information from disclosure (s330(6)), but not when it is used to further a crime.
Traps examiners use
- Telling the client a report has been made. That is tipping off.
- Going ahead with a transaction while waiting for consent.
- Making the report personally to the NCA instead of internally to the MLRO.
- Requiring proof. Suspicion is the trigger.
- Assuming privilege covers anything said to a solicitor.
- Relaxing checks because the client is long standing.
Worked question 1
A trainee on a purchase notices that the client, whose income is modest, plans to pay a £400,000 deposit via a third party in another country. The client cannot explain the source of the money. The trainee suspects money laundering. What should the trainee do?
- A. Ask the client directly whether the money is from crime.
- B. Report to the NCA herself.
- C. Tell the client the firm will report the matter.
- D. Make an internal report to the firm's MLRO, and not proceed or tell the client about the report.
- E. Continue with the matter and report after completion.
Answer: D. Employees report internally to the MLRO, who decides whether to make an authorised disclosure to the NCA. Acting without consent could be an offence under s328, and revealing the report could be tipping off. A, C and E all risk offences.
Worked question 2
An authorised disclosure has been made. The client asks why the firm has not completed. Which response is correct?
- A. Tell the client the firm has made a report to the NCA.
- B. Tell the client the firm is waiting for the NCA's decision.
- C. Avoid giving any indication of the report or investigation, explaining only that completion cannot take place yet, and get advice from the MLRO.
- D. Tell the client to take the matter elsewhere.
- E. Tell the client the NCA is investigating.
Answer: C. Telling the client of the report is tipping off if likely to prejudice an investigation. The solicitor must give no hint, and should consult the MLRO about what can be said. D could itself raise suspicion and does not solve the problem.
Checklist before you move on
- What do I know or suspect, and is it more than speculation?
- Report internally to the MLRO as soon as practicable.
- Do not proceed without consent. Do not tip off.
- Customer due diligence: identity, owner, source of funds.
- Is privilege genuinely engaged (crime fraud exception)?
- Record the decisions.
Test yourself on more original questions in our SQE1 practice questions.
Questions
What is tipping off?
Disclosing that a money laundering report has been made, or that an investigation is under way, where it is likely to prejudice an investigation. It is an offence in the regulated sector under s333A of the Proceeds of Crime Act 2002.
Who do I report money laundering suspicions to?
In a firm, to the money laundering reporting officer (the nominated officer), who decides whether to make a report to the National Crime Agency.
Does legal professional privilege stop a report?
It can, for information that is privileged, but not where the legal advice is used to further a criminal purpose.
Related
- SQE1 Legal Services
- SQE1 practice questions: how to answer single best answer items
- SQE1 mock: how to time, pace and review it
Sources: SRA: SQE1 Assessment Specification (from 1 September 2026); Proceeds of Crime Act 2002; Money Laundering Regulations 2017. Checked 10 November 2026.