What if you have never reported a suspicious matter?
Our extensive experience with assisting clients to respond to an
AUSTRAC Compliance Assessment has taught us that AUSTRAC takes a
dim view of reporting entities that have never lodged a suspicious
matter report. In AUSTRAC's view, failure to lodge any
suspicious matter reports is an indicator that the entity's
systems and controls are not effective in identifying and prompting
an investigation into suspicious matters, which could lead to the
lodging of suspicious matter reports.
We conduct independent reviews of companies bound by the AML/CTF
regime. As part of the reviews, we come across examples of
different client types (including fund managers, remitters and
financial planners) who have not lodged any suspicious matter
reports with AUSTRAC.
When some clients are questioned and provide information as part of
the review, it becomes clear that the failure to lodge suspicious
matter reports was not because no suspicious matter have arisen
– rather, that the AML/CTF compliance officer was unsure
whether the matter was suspicious, and was also concerned about the
reputational risk and damage to the customer relationship if the
suspicion was investigated and enhanced customer due diligence
procedures were followed.
For example, when a financial planner obtains detailed financial
information from a customer or a potential customer as part of
providing a Statement of Advice, they may have questions about the
source of a customer's funds or a particular transaction or
Another example was the story at the beginning of this article -
where an online CFD provider suspects that a person is not who they
claim to be (they are operating under an alias), as a competitor
who tries to open an account for the purpose of testing the CFD
These suspicions should be referred to the AML/CTF compliance
officer for consideration in accordance with the procedure outlined
in the company's AML/CTF
Program, and a decision whether or not to lodge a suspicious
matter report must be made within the above timeframes. It is not
enough for the financial planner, fund manager or CFD provider to
simply 'turn a blind eye' to the potential suspicion.
Often, a company's response is to simply decline to accept that
person as a client, and no further action is taken.
We understand that companies are loathe to damage customer
relationships by asking questions that seem to go beyond the scope
of the services they are providing (or intend to provide), or by
acting as an unofficial arm of the regulator and 'passing
judgment' on a customer's activities by lodging a
suspicious matter report with AUSTRAC. Also, companies are worried
that by continuing to provide services to a customer where a
suspicion exists, that they will facilitate money laundering or
However, we emphasise that reporting entities are bound to
comply with the AML/CTF laws, which include having a risk-based
system and controls to identify, assess and control the risk of its
business being used to facilitate money laundering and terrorism
financing. It may be that its system and controls are calibrated so
that if a suspicion is formed about a customer, the company will
not accept that person as a customer. This is an acceptable
risk-based control – however, the company remains bound by
the obligation to report the suspicious matter to AUSTRAC (without
tipping-off the customer).
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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