Suspicious matter reports

Understand the reporting decision

A suspicious matter report (SMR) gives AUSTRAC information about a suspicion formed on reasonable grounds. Section 41 sets the reporting conditions.

The test can concern identity, information relevant to offences or proceeds of crime, or preparation for money laundering or terrorism financing. Proof is not required.

A request or enquiry can qualify when it concerns a designated service of a kind the reporting entity ordinarily provides. A completed transaction is unnecessary.

The ordinary deadline is three business days after the day of forming the suspicion. Terrorism financing suspicions have a 24-hour deadline from formation.

A qualified five-business-day period applies to certain non-terrorism matters. The entity must reasonably believe that some, but not all, required information may have legal professional privilege. That privilege must belong to another person.

That timing rule does not cover all information or the entity’s own privilege. Section 41(2A) separately addresses reasonable belief that all grounds are privileged.

Sources: AUSTRAC: Reasonable grounds; When SMR obligations apply; Federal Register of Legislation: Sections 41(1), 41(2)(a), (aa), (b), 41(2A), 41(3) and 42.

Build the narrative from evidence

A suggested way to prepare a report starts with the people, service and events in order. Separate direct observations, the customer’s explanation and the reviewer’s inference. Explain why the combined information raised suspicion. Give dates and transaction references so others can trace the activity. Do not call someone a criminal without evidence.

Describe conflicts between documents. Give a clear account of the information and reasons. Avoid dramatic descriptions of the customer.

Source: AUSTRAC: Writing your grounds for suspicion.

Separate an indicator, a suspicion and proof

An indicator is a reason to examine the circumstances. A suspicion on reasonable grounds is the reporting test. Proof that a crime occurred is a different standard and is not required before submitting an SMR. AUSTRAC expects the reporting entity to describe why a reasonable person with similar knowledge and the same material would reach the suspicion.

Consider the available information together. An unusual instruction may have a legitimate explanation. Several related inconsistencies may support a suspicion even where no single document proves an offence. Record the customer’s explanation as well as conflicting evidence. Do not delay a report after the test is met merely to obtain a confession, finish a separate investigation or identify the exact offence.

Source: AUSTRAC: Reasonable grounds; Grounds for suspicion; Enhanced customer due diligence.

Invented example: conflicting ownership information

In this fictional example, a company customer supplies an ownership chart naming one controller. Instructions and payment records suggest another person directs the transaction. The reviewer asks ordinary information questions through the approved process and compares the answers. If the inconsistency remains, the reviewer assesses its relevance to the legal reporting test. The record includes the documents, responses and decision time.

The record identifies unavailable information. A missing answer does not prove an offence.

Source: AUSTRAC: Initial assessment; Grounds for suspicion.

Invented example: Monday’s suspicion and Wednesday’s meeting

In a fictional non-terrorism matter, a staff member records an unusual instruction on Monday morning. The reviewer examines the available evidence and forms a suspicion on reasonable grounds on Monday afternoon. A scheduled management meeting is on Wednesday. The record should preserve Monday’s suspicion time; Wednesday’s administrative approval does not restart the reporting period.

A useful chronology records the instruction, evidence received, review steps, suspicion time and submission receipt. For the ordinary non-terrorism rule, apply the three-business-day period after the day of formation. For terrorism financing, apply the 24-hour rule from formation. Examine the applicable calendar and qualified LPP provisions rather than copying a date from this example.

Plan for staff absence. The fictional firm names a backup who can access the restricted record and submit the report on time. This does not change the legal responsibility or extend the deadline.

Sources: AUSTRAC: Steps to follow; Submission deadlines; Federal Register of Legislation: Sections 41(2)(a), (aa), (b) and 41(2A).

Make responsibility and timing visible

In this invented example, a small firm could name a reviewer and backup in a restricted decision record. Record when the alert arrived, when information was reviewed and when suspicion was formed. These are separate events. Specify an escalation route for the reviewer’s absence.

This arrangement is a suggestion. Apply the current legal deadlines and exceptions to the actual report.

Sources: AUSTRAC: Steps to follow; Submission deadlines; Federal Register of Legislation: Sections 41(2)(a), (aa), (b) and 41(2A).

What changes after the first report

A later suspicious request can require another SMR. A previous report does not cover every future event. Assess new reasonable grounds separately from the earlier report. A new report can refer to the earlier report number. For remittance networks, either the affiliate or provider can report under the relevant written agreement.

Privilege needs separate treatment. Where part of the required information is privileged, submit the unprivileged information and the required LPP form.

Sources: AUSTRAC: Multiple suspicions about a customer; Remittance network providers and affiliates; AUSTRAC: Suspicious matter reporting obligations.

Make the report understandable without your file

A suggested narrative states who was involved, the service requested, what happened, when and why the facts raised suspicion. Include relevant amounts and references where available. Identify missing documents or identity details. Do not guess.

Keep the submission reference and relevant later information linked to the restricted case record. Customer communications need their own assessment under the tipping-off rules. Report preparation does not authorise staff to tell a customer that an SMR is being considered or submitted.

Sources: AUSTRAC: Writing your grounds for suspicion; Multiple suspicions about a customer; AUSTRAC: What is tipping off; What it means to prejudice an investigation.

SMR, SAR and STR

Australia uses suspicious matter report, or SMR. FinCEN in the United States uses suspicious activity report, or SAR.

FATF Recommendation 20 uses suspicious transaction reporting, often shortened to STR. These terms describe related reporting functions under different frameworks.

A foreign report name does not import its threshold, deadline or confidentiality rules into Australia. Use the Australian provisions for the Australian duty.

Sources: FinCEN: Suspicious Activity Reports (SARs); FATF: Recommendation 20.