Suspicious matters

22-JAN-2010

If a reporting entity forms a suspicion at any time while dealing with a customer (from the enquiry stage to the actual provision of a designated service, or later) on a matter that may be related to an offence, tax evasion, or proceeds of crime, they must submit a suspicious matter report (SMR) to AUSTRAC. Offences include money laundering, terrorism financing, operating under a false identity or any other offence under a Commonwealth, State or Territory law.

An SMR must be submitted within three business days of forming the suspicion. If the suspicion relates to the financing of terrorism, the SMR must be submitted within 24 hours of forming the suspicion.

Should a reporting entity continue a business relationship with a customer about whom a suspicion has been formed?

There are no provisions in the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) that place obligations on a reporting entity to:

  • refrain from providing a designated service, including terminating a business relationship
  • continue providing a designated service or a business relationship with a person about whom they have formed a suspicion on reasonable grounds.

It is a matter for reporting entities to determine, taking into account their risk-based systems and controls, whether to terminate the relationship with the customer.

The decision to terminate a business relationship does not affect a reporting entity's obligation to comply with section 123 of the AML/CTF Act. In the process of terminating a relationship, the reporting entity must not disclose to the customer that a suspicion on reasonable grounds has been formed and/or communicated to AUSTRAC.

The AML/CTF Act does not limit the operation of any other legal (or other) obligation with which a reporting entity may have to comply. It is the responsibility of the reporting entity to determine what additional action, if any, it is required to undertake in relation to the customer and/or transaction under any other Act, including (but not limited to) the Charter of the United Nations Act 1945.

If a reporting entity has lodged an SMR in relation to a customer and decides to continue the business relationship, what are the ongoing SMR obligations?

Notwithstanding the submission of an initial SMR, a reporting entity must continue to comply with all relevant provisions of the AML/CTF Act in all future dealings with that customer, which may include a requirement to submit additional SMRs.

Providing additional designated services to the customer does not necessarily impose further SMR reporting obligations on the reporting entity.

An SMR reporting obligation will only arise where the reporting entity suspects on reasonable grounds that:

  • the additional information the reporting entity has acquired may be:

    • relevant to the investigation or prosecution of a person for an evasion (or attempted evasion) of a taxation law (including that of a State or Territory), or an offence against a law of the Commonwealth or of a State or Territory; or
    • of assistance in the enforcement of the Proceeds of Crime Act 2002 (or regulations under that Act), or of a law of a State or Territory that corresponds to that Act or its regulations; or
  • the provision of the additional designated service may be:
    • preparatory to the commission of an offence related to money laundering or the financing of terrorism; or
    • relevant to the investigation or prosecution of a person for an offence related to money laundering or the financing of terrorism.

Subsequent transactions or matters involving the customer are only required to be reported where they meet these criteria.

Does section 123 of the AML/CTF Act prohibit a reporting entity from reporting the matter to another government body?

The AML/CTF Act does not limit and is not limited by, the operation of any other regulatory obligations with which a reporting entity may have to comply.

Under section 123 of the AML/CTF Act, reporting entities are prohibited from the unauthorised disclosure of certain information about SMRs. The AML/CTF Act provides an exemption from this prohibition to reporting entities who are required to report illegal or suspected illegal activity to government bodies other than AUSTRAC where:

  • the disclosure is in compliance with a requirement under a law of the Commonwealth, a State or a Territory; or
  • the disclosure is to an Australian government body that has responsibility for law enforcement.

Agencies or authorities of a State or Territory of Australia are included within the definition of an Australian government body.

Further information

AUSTRAC has produced various educational tools and publications to assist reporting entities with their SMR obligations. These include:

07-MAR-2013

Related information

05-MAR-2013

AML/CTF Act

AUSTRAC Online

AUSTRAC Regulatory Guide

Brochure series

E-learning courses

Public Legal Interpretations

Reporting obligations

07-MAR-2013

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