In this blog series, we examine the important obligations of
companies and businesses bound by the AML/CTF Act when lodging
suspicious matter reports with AUSTRAC.
A client of ours was recently the subject of an AUSTRAC desk audit. The
client was showing AUSTRAC how accounts were opened, including a
list of new accounts. One new account was in the name of "Joe
Bloggs". When questioned by AUSTRAC, our client advised that
the account was merely "a competitor testing our on-boarding
process". AUSTRAC then asked our client "did you lodge a
suspicious matter report? You should have." Read on to find
AUSTRAC has a multi-faceted role as an overseer of compliance,
as well as a financial intelligence unit. AUSTRAC analyses reports
to uncover patterns of criminal activity including money laundering
or terrorism financing (ML/TF), and
people smuggling. The resulting financial intelligence is
disseminated to partner agencies for use in criminal investigations
and other operations. AUSTRAC also analyses transaction reports to
identify risk indicators for use in its compliance functions.
What is a suspicious matter?
section 41 of the AML/CTF Act, a suspicious matter
report should be lodged with AUSTRAC if an entity bound by the
AML/CTF Act (reporting entity) forms a
suspicion on reasonable grounds that:
a person (or their agent) is not who they claim to be (this
should include Joe Bloggs);
the reporting entity has received information from a person
that may be:
relevant to investigate or prosecute that person for:
evasion or attempted evasion of a tax law; or
an offence against a Commonwealth, state or territory law;
of assistance in enforcing:
the Proceeds of Crime Act 2002; or
a state or territory law that corresponds to that Act or its
providing a designated service to that person may be:
preparatory to committing an ML/TF offence; or
relevant to the investigation or prosecution of a person for an
The obligation to report a suspicious matter arises when a
reporting entity commences or even proposes to provide a service to
a person. This means that the obligation to report suspicious
matters include situations where the person is not yet your client,
or has simply lodged an application with your company, or provided
your company with information, and you have not yet performed any
services or processed any transactions.
Reporting a suspicious matter does not mean that you need to
know or be able to prove the exact nature of any possible or
potential criminal offence, nor do you need to show that particular
funds or property have been acquired via criminal or unlawful
means. You are not required to step into the shoes of law
enforcement or the Australian Federal Police.
Rather, the suspicion must simply be based on reasonable
grounds, that is, based on all of the circumstances and information
available, that a reasonable person must have a real suspicion of
the relevant matters, and the suspicion must be based on matters or
evidence that support the truth of the suspicion.
How do you identify a suspicious matter?
The AML/CTF Act and Rules require reporting entities to
have in place an AML/CTF
Program which sets out the entity's risk-based systems and
controls to identify, assess and control the risk of its business
being used to facilitate ML and TF. These systems and controls
should enable the entity to identify and investigate suspicious
activity and behaviour, and also to ensure that this behaviour is
reported to AUSTRAC.
The AML/CTF Program should include indicators which are relevant
and applicable for the entity's business, which would or could
alert the business that a suspicious matter has arisen.
Examples of triggers or indicators include:
using aliases, or becoming aware that false ID has been
comments by the customer about tax evasion or other illegal
unusual business dealings in circumstances that are difficult
customers who are resident in high risk or secrecy
complex customer structures which have no commercial
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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