Tipping off offence — section 123 of the AML/CTF Act

What section 123 prohibits

Section 123 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) creates the tipping-off offence. This offence prohibits the disclosure of information regarding Suspicious Matter Reports (SMRs). Specifically, it is unlawful to reveal to anyone other than AUSTRAC, an officer of the entity, or a permitted recipient that an SMR has been, or is required to be, given to AUSTRAC.

The rationale behind this restriction is to protect the integrity of investigations. Disclosing the existence of an SMR could prejudice an investigation by alerting the subject of the report to scrutiny.

The offence applies to officers, employees and agents of reporting entities and carries a maximum penalty of 2 years imprisonment or 120 penalty units, or both.

What constitutes 'tipping off'

“Tipping off” under section 123 of the AML/CTF Act refers to the communication of information that could lead to the identification of a person who has been the subject of a Suspicious matter reports — AUSTRAC. This includes directly disclosing the existence of a suspicious matter report itself.

It also encompasses disclosing any information that, while not explicitly referencing the report, could reasonably be used to infer that a suspicious matter report has been made. Examples of this include informing a customer that their transaction has been reported or that it triggered a review.

Internal communication is an exception. Disclosure of information between an entity’s AML team, compliance officer, and senior management is permitted, provided it is for the purpose of the AML/CTF program.

Permitted disclosures

Section 123(3) of the AML/CTF Act and Chapter 75 of the AML/CTF Rules outline specific circumstances where disclosures are permitted despite the general prohibition on tipping off offences. These permitted disclosures are designed to facilitate legitimate activities while minimising the risk of prejudicing investigations.

Disclosures are permitted to AUSTRAC and to authorised law enforcement officers. Additionally, disclosures between members of a designated business group are allowed, provided they are for the purpose of risk management.

Further permitted disclosures include those made to the entity's legal advisers for the purpose of obtaining legal advice, and to officers within the entity performing compliance, audit, risk, and AML/CTF functions.

Operational compliance

Operational compliance focuses on preventing the disclosure of information that could constitute a tipping-off offence. Reporting entities must ensure frontline staff are trained to avoid revealing the existence of transaction reviews or Suspicious Matter Reports (SMRs) to customers.

If a customer inquires about delays or declined services, staff must provide only generic responses. Direct explanations relating to the reasons for the action are prohibited. This is to protect the integrity of the reporting process and prevent potential compromise of investigations.

Communications relating to SMRs must be carefully managed. These should be retained within restricted systems, limiting access to only those individuals who require it. AUSTRAC has taken enforcement action, including individual prosecutions, against staff who have alerted customers to SMRs. The tipping-off offence is linked to the false or misleading statement offences outlined in section 137.