Suspicious minds: what you need to know about AML/CTF suspicious matters reports

This article was originally published for The Brief (8 October 2026)

A key obligation for reporting entities under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) is the reporting of suspicious matters. The obligation is to submit a suspicious matters report (SMR) to AUSTRAC if a reporting entity suspects on 'reasonable grounds' that:

1. the information that the entity receives may be relevant to the investigation, prosecution or commission of a crime (for example, tax evasion); 

2. a customer, future customer or their agent isn't who they claim to be; or 

3. a person is planning a Money Laundering / Terrorism Financing offence using a designated service. 

In this article, we unpack the key concepts and considerations that arise from the SMR obligation so you can keep that suspicious mind.

Reasonable grounds

There is no set definition of what constitutes 'reasonable grounds'. However, it is viewed as an objective standard applying i.e. would a reasonable person in your position form the suspicion based on the facts, matters, circumstances and information that is before you? It is important that you are able to explain and support the conclusion that you came to that would demonstrate a reasonable person in your position would likely reach the same view.

If we look beyond the context of the AML/CTF regime to case law, Kitto J in Queensland Bacon Pty Ltd v Rees [1966] HCA 21 looked at the threshold for 'suspecting' insolvency and is often quoted as saying,

"A suspicion that something exists is more than a mere idle wondering whether it exists or not; it is a positive feeling of actual apprehension or mistrust, amounting to "a slight opinion, but without sufficient evidence", as Chambers's Dictionary expresses it." 

When does the SMR obligation start to arise?

The SMR obligations will arise when the reporting entity commences to provide or proposes to provide a designated service to a person. It could be when a person enquires whether the reporting entity would be willing or prepared to provide a designated service and the designated service is of a kind that the reporting entity ordinarily provides (section 41 AML/CTF Act). This would apply even if the reporting entity doesn't end up providing the designated service. 

AUSTRAC Guidance indicates that a SMR must be submitted each time a new suspicion on reasonable grounds arises, even if it relates to someone that has been the subject of a previous SMR that you have lodged.  For example, a reporting entity lodged an SMR with respect to suspicion arising from how a person was restructuring a transaction. They later seek to enter into another transaction that gives rise to an SMR.

When you don't have to submit an SMR

There are very limited circumstances when a reporting entity would not be required to submit an SMR. For example, this includes the services that are provided at or through a permanent establishment in a foreign country (other than a service covered by item 32A of Table 1 in section of the AML/CTF Act – remittance network services) if legal professional privilege (LPP) is claimed over all of the information that you hold.

Submission deadlines

There are tight and hard deadlines for the submission of SMRs. These are:

1. 24 hours of forming the suspicion if it relates to terrorism financing; and

2. 3 business days after the day you formed the suspicion or other suspicions

Where you claim the SMR contains some information that is subject to LPP, you have 5 business days after the day you form the suspicion to submit the SMR, although this extended timeframe does not apply if the suspicion relates to terrorism financing because of the importance of AUSTRAC needing to move swiftly on such information for security reasons.

Suspicion about reportable information

The AML/CTF Act and Rules outline the categories of reportable information. These include where the reporting entity suspects on reasonable grounds that:

• the first person is not the person they claim to be

• an agent of the first person who deals with the reporting entity is not the person they claim to be

• the information that the reporting entity has concerning the provision, or prospective provision, of the designated service:

• may be relevant to the investigation of, or prosecution of a person for an evasion or attempted evasion of a taxation law or of a law of a State or Territory that deals with taxation

• may be relevant to investigation of, or prosecution of a person for, an offence against a law of the Commonwealth or of a State or Territory

• may be of assistance in the enforcement of the Proceeds of Crime Act 2002 or regulations under that Act or may be of assistance in the enforcement of a law of a State or Territory that corresponds to the Proceeds of Crime Act 2002 or regulations under that Act

• is preparatory to the commission of an offence or investigation of an offence with respect to terrorism financing or money laundering.

Red flags 

One indicator on its own may not be sufficient to amount to a reasonable suspicion and it may be that more than one indicator is required depending on the circumstances. Some common red flags include:

• the customer provides vague information about why they require the designated service

• the customer wants to remain anonymous or is acting for an undisclosed principal

• is evasive or defensive in their responses

• refuses to provide identification information

• makes unusually large or complex transactions (which may or may not be out of character)

• changes the nature of the transactions without reasonable explanation

• splits transactions into amounts under the $10,000 cash transaction threshold without reasonable explanation

• transacts or seeks to transact with persons in higher risk jurisdictions

Your policies, procedures and program (PPP)

A reporting entity's PPP are important documents as they provide the framework and escalation points in an organisation and will address how suspicious matters are dealt with. For example, escalation of a suspicious matter may be required to be made to the AML/CTF Compliance Officer for verification of whether something amounts to a reasonable suspicion (when in doubt) and for the preparation of the relevant SMR. 

Tipping off

It is an offence to tip off the subject of an SMR. The penalty is imprisonment for 2 years or 120 penalty units, or both. 

Tipping off occurs when a person is or has been:

• a reporting entity

• an officer, employee or agent of a reporting entity 

• a member of an AML/CTF reporting group

• an officer, employee or agent of a member of a reporting group

• required by a notice to give information or produce documents to AUSTRAC under section 49(1) or 49B(2) of the AML/CTF Act

and that person:

• discloses that information to another person (other than an AUSTRAC entrusted person) and

• the disclosure relates to certain types of information (for example, information about SMRs) which could reasonably be expected to prejudice an investigation.

It is irrelevant if you know or think an investigation has started. 

The type of information about SMRs to which tipping off would apply, would be:

1. that information which establishes why you submitted an SMR or that the obligation to submit one has been triggered

2. a report made or prepared for the purpose of meeting SMR obligations and any copies

3. any document that sets out information contained in an SMR 

4. the fact an SMR is being made

Key takeaways 

The short and hard timeframes in which to submit SMRs make it imperative that a reporting entity has the following in place:

• a robust and clear process for identifying and dealing with suspicious matters with key escalation points

• training for all staff on common indicators and red flags for suspicious matters, especially those particular to the entity's particular industry 

• an understanding of what information will be required to be included in an SMR

• records of how a reasonable suspicion was arrived at (these should be kept in a separate file accessible by only those who need to know)

• a deadline managed system

• appropriate controls to manage the risk of tipping off when engaging with third parties

This article is for information purposes only. If you require legal advice specific to your circumstances, please do not hesitate to contact our AML/CTF team. 

Authors: Rebecca Hegarty & Lisa-Marie McKechnie

This publication is intended as a source of information only. No reader should act on any matter without first obtaining professional advice.