Suspicious Matter Reports: When and How to File

What Is a Suspicious Matter Report?

A suspicious matter report (SMR) is a report you file with AUSTRAC when you form a suspicion (or have reasonable grounds to suspect) that a matter is related to money laundering, terrorism financing, tax evasion, or another serious crime.

For Tranche 2 entities, the SMR obligation applies to any matter that arises in the course of providing a designated service. This means accountants, lawyers, real estate agents, and conveyancers will all need to file SMRs when the relevant conditions are met.

When Must You File?

You must file an SMR if, at any point while providing a designated service, you:

• Suspect on reasonable grounds that the matter relates to an offence against a Commonwealth, state, or territory law
• Suspect that a transaction or service may be related to ML/TF
• Suspect that information you hold may be relevant to the investigation or prosecution of a person for an offence
• Suspect that information you hold may be of use to AUSTRAC in performing its functions

Filing Timeframes

Common Scenarios for Accountants

Here are scenarios that should raise your suspicion radar. These are illustrative, not exhaustive:

Client Behaviour

• A new client is reluctant to provide identification or provides inconsistent identity documents
• A client provides instructions that don't make commercial sense for their stated business
• A client asks you to structure transactions to avoid reporting thresholds
• A client has unexplained sources of wealth or income inconsistent with their known business activities
• A client is evasive about the purpose of a transaction or changes their story

Transaction Patterns

• Multiple transactions just below the $10,000 threshold (structuring/smurfing)
• Transactions involving high-risk jurisdictions without clear business rationale
• Rapid movement of funds through multiple accounts or entities
• Cash-intensive businesses with revenue inconsistent with their size or location
• Complex corporate structures with no apparent legitimate purpose

Professional Service-Specific Red Flags

• Requests to create trusts or companies with no clear business purpose
• Requests to hold funds in your trust account without a related matter
• Instructions to pay funds to unrelated third parties
• Pressure to complete transactions quickly without proper due diligence

The Tipping-Off Offence

The tipping-off rules mean:

• Do not tell the client you have filed or are considering filing an SMR
• Do not tell colleagues outside the compliance team (unless they need to know for the reporting process)
• Do not alter your behaviour in a way that signals to the client that something is wrong
• Continue providing services normally unless directed otherwise by AUSTRAC or law enforcement

How to File an SMR

Step 1: Document Your Suspicion

Before filing, write down what triggered your suspicion: the specific facts, behaviour, or transactions that raised concern. This becomes part of your internal compliance record and helps you complete the SMR form accurately.

Step 2: Consult Your Compliance Officer

If you have a compliance officer (and you should), discuss the matter with them. They can help assess whether the suspicion threshold is met and ensure the SMR is complete and accurate.

Step 3: Complete the SMR Form

SMRs are filed electronically through AUSTRAC Online. The form requires:

• Your reporting entity details
• Information about the person(s) or entity/entities involved
• Details of the suspicious matter (what, when, how much, why it's suspicious)
• Any supporting information or documentation references

Step 4: Submit to AUSTRAC

File through AUSTRAC Online within the required timeframe (24 hours for terrorism-related matters, 3 business days for all others).

Step 5: Retain Records

Keep a copy of the SMR and your internal notes for 7 years. Store them in a secure, access-controlled location separate from the general client file (to comply with tipping-off restrictions).

Step 6: Monitor

Continue monitoring the client relationship. One SMR may be followed by additional SMRs if further suspicious activity is observed. You are not expected to investigate — that's AUSTRAC's role — but you should remain alert.

What If You're Wrong?

The AML/CTF Act provides safe harbour protections for SMR filers. If you file an SMR in good faith, you are protected from:

• Civil liability (you can't be sued by the client for filing)
• Breach of confidentiality (filing an SMR does not breach your professional duty of confidence)
• Disciplinary action by your professional body (for the act of filing)

The safe harbour applies even if the suspicion turns out to be unfounded. AUSTRAC has consistently stated that it is better to over-report than under-report. There is no penalty for filing a good-faith SMR that turns out to be a false alarm. There are significant penalties for failing to file when you should have.