Once a suspicious matter has been identified, it must be
reported to AUSTRAC within:
24 hours after forming the relevant suspicion, if the suspicion
relates to terrorism financing; or
3 business days after forming the suspicion, in all other
The time of forming the suspicion is not when the employee
alerts management of the potentially suspicious behaviour. AUSTRAC
accepts that the suspicion may be 'formed' after the
AML/CTF compliance officer has investigated the matter, which may
additional KYC checks.
Ideally, the AML/CTF
Program should include details of the escalation process (that
is, the process by which suspicions are escalated through the
organisation), as well as details of the investigation process, and
the steps to be taken once the AML/CTF compliance officer has
formed an opinion regarding the reporting of the suspicious
The report must be in the prescribed format, and AUSTRAC may
require you to provide additional information about a suspicious
matter report even after it has been lodged with AUSTRAC.
What are the penalties for failing to report a suspicious
AUSTRAC can apply to the Federal Court for a penalty to be
ordered against a company or a non-corporate entity for failing to
lodge a suspicious matter report, or for lodging one late. The
maximum penalty payable by a company is $17 million, and for a
non-corporate entity is $3.4 million.
(Although not as a result of failing to lodge a suspicious
matter report, in February 2015 and in 20 May 2015,
AUSTRAC fined Moneygram Payment Systems Inc $122,400 and
$336,000 respectively, for providing money remittance services
through unregistered remittance businesses. This is just one
example of AUSTRAC's increasing willingness to act against
entities who do not comply with the
The prohibition on tipping-off
This is really important. The reporting entity must not disclose
to any person (other than AUSTRAC) that it has formed a suspicion
about a customer or lodged a suspicious matter report. Thus, care
must be taken not to alert the customer that the suspicious matter
report has been lodged or even that a suspicion has been formed.
The entity cannot even disclose specific details about suspicious
matter reports to its external independent reviewer.
However, if the reporting entity is part of a designated
business group, the members of the group can share suspicious
matter reporting information. Also, if the disclosure complies with
requirements under another law of the Commonwealth, state or
territory, or if it is to an Australian government body responsible
for law enforcement, then the tipping-off prohibition does not
apply. Further, entities can disclose suspicious matter reports to
their legal practitioners for the purpose of obtaining legal
advice. We sometimes find that large corporate groups are breaching
their obligations by sharing this kind of information with other
parts of the group who are not part of a designated business
Can you continue to provide services to a customer after a
suspicious matter report about them has been lodged with
This can be a dilemma for companies. As noted above, the
obligation not to tip-off the customer about your suspicions means
that even once the report is lodged with AUSTRAC, you should often
continue to provide your services to the customer.
However, the forming of a suspicion about a customer, or the
lodging of a suspicious matter report, will trigger an obligation
for reporting entities to conduct enhanced customer due
Practically, this means that in order to comply with your
Program, and with the requirements of the AML/CTF legislation,
appropriate additional KYC checks and procedures must be conducted
before you can continue to provide services (which could mean
completing the transaction or providing another service). Further,
care must be taken to ensure that the enhanced due diligence
procedures do not in themselves tip-off the customer that a
suspicion has arisen.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
There has been a range of recent legal developments that affect privacy, child abuse claims and workers compensation.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).