Suspicious Matter Reports (SMRs): the 24-hour rule and the tipping-off offence

What an SMR is

A Suspicious Matter Report (SMR) is a formal notification a reporting entity submits to AUSTRAC. This is required under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 when the entity suspects on reasonable grounds that a matter may be related to a relevant offence. Examples of such offences include money laundering, terrorism financing, tax evasion, and fraud.

The suspicion prompting an SMR can originate at various points. This includes during the initial process of bringing on a new customer, while a transaction is being processed, or as a result of ongoing monitoring of a customer’s activity.

SMRs are submitted electronically via AUSTRAC Online.

The 24-hour clock

The SMR must generally be lodged within 24 hours of forming the suspicion. This timeframe is a critical compliance requirement for reporting entities. AML Tranche 2 scope checker should be consulted to determine if the reporting entity falls under the relevant obligations.

The timeframe begins when the reasonable suspicion is formed. It is important to recognise that this is not tied to the date of the underlying transaction that triggered the suspicion. The focus is on the point at which the suspicion itself arises.

For matters where the suspicion relates to terrorism financing, the requirement is to lodge an SMR as soon as practicable. This recognises the heightened urgency associated with these types of matters.

Tipping off

Tipping off is a distinct criminal offence under the Anti-Money Laundering and Counter-Terrorism Financing Act. It occurs when a reporting entity discloses to a customer, or to a third party, that an Suspicious Matter Report (SMR) has been, or is about to be, lodged.

The consequences for this offence are serious. Individuals found to have tipped off can face up to 2 years imprisonment, in addition to a substantial financial penalty.

Reporting entities must implement robust internal communications protocols. These protocols are essential to prevent inadvertent tipping off during activities such as investigations, account closures, or remediation processes.

What goes in an SMR

An SMR must contain specific information relating to the suspected suspicious matter. This includes the customer's identifying details and any beneficial owner identifier information available. Transaction details are also essential, outlining the amount, parties involved, and dates of the transaction. Crucially, the report must clearly state the basis for the suspicion.

The report should be supported by relevant documentation. This may include items such as bank statements, invoices, and Know Your Customer (KYC) records. These documents provide context and evidence to support the suspicion of illicit activity.

Finally, the SMR should include internal cross-references. These links connect the report to your organisation’s transaction monitoring and Customer Due Diligence (CDD) systems. This facilitates a thorough audit trail should AUSTRAC require further investigation.