Suspicious Matter Reports. Know When to Report

You've just noticed something off. A customer's transaction doesn't make sense. Their explanation doesn't add up. You've got a gut feeling something's wrong.

That's when you file a Suspicious Matter Report (SMR).

What Is a Suspicious Matter Report?

An SMR is your way of telling AUSTRAC: "Hey, I think this might be money laundering or terrorism financing."

You don't need proof. You don't need to investigate. You don't need to be certain. You just need reasonable grounds to suspect that a matter relates to:

• Money laundering
• Terrorism financing
• Tax evasion (since 2024 amendments)
• Other serious crimes under Commonwealth or state law

The bar for "suspicion" is deliberately low. If something raises red flags, you report it. AUSTRAC will connect the dots.

When You Must File an SMR

You have reasonable grounds to suspect
Notice that word: suspect. Not "know" or "prove" or "investigate thoroughly." Suspect.

If a reasonable person in your position, with your training and experience, would think "this looks suspicious," that's enough.

Examples that trigger SMRs:

Transaction doesn't match customer profile
Your customer's a local cafe owner. Normal monthly revenue: $15,000. Suddenly they're wiring $200,000 to a shell company in the British Virgin Islands. Suspicious? Yes. SMR time.

Customer's evasive about source of funds
"Where did this $500,000 come from?" "Uh, various sources." "Can you be more specific?" "I'd rather not say." SMR.

Transaction has no apparent business purpose
Customer A sends $100,000 to Customer B. Customer B sends $98,000 back to Customer A. Why? "Just helping out a friend." That's structuring or layering. SMR.

Customer suddenly changes behavior
Ten years of normal activity. Then boom — three large international transfers in a week. No explanation. SMR.

Customer tries to avoid reporting thresholds
Multiple $9,500 cash deposits instead of one $50,000 deposit. That's smurfing. SMR.

Customer's nervous or aggressive about CDD
You ask for identity documents. Customer becomes hostile, refuses, or provides fake IDs. SMR.

Adverse media links customer to crime
News article surfaces showing your customer was investigated for fraud, even if no charges were laid. SMR.

The 24-Hour vs 3-Day Rule

Time matters. AUSTRAC wants SMRs fast.

Terrorism financing: 24 hours
If you suspect any link to terrorism or terrorism financing, you've got 24 hours from when the suspicion formed. Not 24 business hours — 24 actual hours, including weekends.

Why so urgent? Because terrorism financing intelligence can prevent attacks. Hours matter.

All other suspicious matters: 3 business days
Money laundering, tax evasion, fraud — you have 3 business days to submit the SMR from when you formed the suspicion.

What Goes In an SMR

AUSTRAC's SMR form asks for:

Who is suspicious?
Customer details, beneficial owners, anyone involved in the suspicious activity.

What did they do?
Transaction details, amounts, dates, accounts, counterparties.

Why is it suspicious?
This is the key part. You explain why a reasonable person would find this suspicious. Use specifics:

• "Customer stated the funds were from employment, but the amount exceeds their annual salary by 400%."
• "Transaction has no apparent commercial purpose. Customer unable to provide explanation when asked."
• "Multiple deposits structured to avoid $10,000 reporting threshold over a 2-week period."

Supporting information
Any documents, records, or context that AUSTRAC might need to understand the suspicion.

The "Tipping Off" Rule

Here's the critical part: You cannot tell the customer you've filed an SMR.

"Hey, just so you know, I reported you to AUSTRAC for suspicious activity."

That's called "tipping off," and it's a criminal offense. Up to 2 years imprisonment.

Why? Because if criminals know they've been reported, they:

• Destroy evidence
• Move funds to avoid seizure
• Flee the jurisdiction
• Target or threaten the person who reported them

So when you file an SMR, you don't mention it. Not to the customer. Not to their lawyer. Not to anyone outside your internal compliance team and senior management.

You process the transaction normally (unless you have other grounds to refuse it). File the SMR. Move on.

Should You Complete the Transaction?

This confuses people. "If I think it's money laundering, why would I process the transaction?"

Because:

1. You might be wrong. Suspicion isn't certainty. Maybe there's a legitimate explanation you're not seeing.
2. AUSTRAC needs the transaction data. If you refuse the transaction, criminals just go elsewhere. If you process it, AUSTRAC gets intelligence.
3. Law enforcement might be watching. Your SMR might feed into an ongoing investigation. Completing the transaction helps them gather evidence.

You can refuse the transaction if you have independent grounds (customer won't provide CDD information, transaction breaches your risk appetite, you genuinely believe completing it makes you complicit in crime). But the SMR itself isn't a reason to refuse.

Quality Over Quantity

AUSTRAC receives hundreds of thousands of SMRs annually. Not all of them are useful.

Bad SMRs:

• "Customer is from a high-risk country." (That's not suspicious by itself)
• "Transaction was large." (How large? Why is that suspicious for this customer?)
• "I just felt something was off." (What specifically made you feel that way?)

Good SMRs:

• "Customer stated funds were from inheritance, but could not provide will, death certificate, or executor contact when requested."
• "Customer's business is a local bakery (annual revenue ~$200K per tax returns). Today they wired $500K to an offshore entity they could not explain."
• "Customer made seven cash deposits of $9,800-$9,900 over 10 days. When asked about the pattern, became defensive and refused to explain."

The more specific and factual your SMR, the more useful it is to AUSTRAC and law enforcement.

Real Examples from AUSTRAC Enforcement

Westpac's failure
Westpac processed thousands of transactions to the Philippines and Southeast Asia that showed clear child exploitation patterns. Low-value transfers to known high-risk areas. Multiple transfers to the same individual recipients. Suspicious patterns visible for years.

They didn't file SMRs. Why? Because their transaction monitoring didn't flag the activity, and staff weren't trained to recognize the red flags.

Result: $1.3 billion penalty. One of the failures? Inadequate SMR processes.

Crown Resorts' high-rollers
Crown Casino had customers gambling hundreds of millions. Some were known links to organized crime. Some used junket operators (known ML risk). Funds came from complex offshore structures.

Crown's staff noticed suspicious activity but didn't file SMRs because they weren't sure or didn't want to offend VIP customers.

Result: $450 million penalty. AUSTRAC specifically cited failure to submit SMRs for suspicious high-roller activity.

Common SMR Mistakes

Mistake 1: Waiting for certainty
"I'll file an SMR once I investigate further and confirm it's actually money laundering."

Wrong. You file when you form a suspicion. Let AUSTRAC investigate.

Mistake 2: Not documenting the suspicion
You file an SMR but don't write down what made you suspicious, when you formed the suspicion, or what information you relied on. AUSTRAC audits your SMRs and asks you to explain your reasoning. You've got nothing.

Mistake 3: Filing late
You noticed something suspicious on Monday. You filed the SMR on Friday. That's a breach of the 3-day timeline.

Mistake 4: Telling the customer
"By the way, we had to report this transaction to AUSTRAC." Criminal offense.

Mistake 5: Not following up with ECDD
You file an SMR, but you don't escalate the customer to enhanced due diligence. AUSTRAC expects that once you've filed an SMR, that customer is now high-risk.

What Happens After You File?

Short answer: You'll probably never know.

AUSTRAC receives your SMR. They analyze it. They match it against other intelligence. They might share it with law enforcement. They might do nothing (if it turns out to be a false positive).

You won't get feedback. You won't hear "Good job, that customer was actually a drug trafficker" or "False alarm, they're legitimate."

That's deliberate. If AUSTRAC told you the outcome of every SMR, it would:

• Risk tipping off criminals if information leaked
• Compromise ongoing investigations
• Create liability if they confirmed criminality (and you later got sued by the customer)

So you file, maintain your records, and move on.

Tranche 2: SMRs for New Sectors

From July 2026, lawyers, accountants, and real estate agents will need to file SMRs.

Real estate agents:
Foreign buyer offering full cash for a $5 million property. Won't disclose source of funds. Nominee director fronting for an undisclosed beneficial owner. SMR.

Accountants:
Client wants you to set up five shell companies with nominee directors and asks you not to keep records of who the beneficial owner is. SMR.

Lawyers:
Client wants to move $2 million through your trust account, from one shell company to another, with no apparent legal transaction underlying it. SMR.

These professions aren't used to this. But from July 2026, the obligation is the same as for banks: If you suspect ML/TF, you file an SMR. No exceptions.

Technology Helps (But Doesn't Decide)

Automated transaction monitoring can flag suspicious patterns — structuring, unusual activity, high-risk jurisdictions, PEP links.

But technology doesn't file SMRs. Humans do.

Platforms like ARCaml can:

• Alert you when a customer's activity doesn't match their profile
• Collect information needed for an SMR (customer details, transaction data)
• Track when suspicions were formed (for timeline compliance)
• Store SMR records for AUSTRAC audits

But you still need a trained person to review the alert, assess whether it's genuinely suspicious, and make the call to file an SMR.

The Bottom Line

SMRs are one of the most important obligations in the AML/CTF Act. They're how AUSTRAC gathers intelligence. They're how law enforcement builds cases. They're how serious crimes get detected and disrupted.

File them when you should. File them on time. File them with enough detail to be useful. And never, ever tip off the customer.

Because the alternative — not filing when you should've — is how you end up in an AUSTRAC enforcement action explaining why you chose to look the other way.