AUSTRACs guidance on submitting more effective suspicious matter reports SMRs
04 June 2021
04 June 2021
In April 2021, the Australian Transaction Reports and Analysis Centre (AUSTRAC) released new suspicious matter reporting resources.
The resources provide guidance to reporting entities on how to submit better quality suspicious matter reports (SMRs). Specifically, AUSTRAC released:
The SMR Reference Guide contains guidance on red flag indicators, as well as examples of both good and bad quality SMRs.
The SMR Checklist contains a list of SMR tips for easy reference when creating and submitting an SMR.
Reporting entities who provide, or who are proposing to provide, a designated service outlined in section 6 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) have suspicious matter reporting obligations (see: section 41, Anti-Money Laundering and Counter-Terrorism Financing Act 2006 [Cth]). Specifically, SMRs are required to be submitted to AUSTRAC if the entity suspects on reasonable grounds that a person is not who they claim to be, or the provision or prospective provision of a designated service relates to:
SMRs are required to be submitted within 24 hours if the suspicion relates to terrorism financing, or within 3 business days if the suspicion relates to money laundering or any other offence.
SMRs submitted by a reporting entity are subject to the 'tipping off' prohibitions outlined in section 123 of the AML/CTF Act (see: section 123, Anti-Money Laundering and Counter-Terrorism Financing Act 2006 [Cth]). This means that if an SMR obligation has arisen and the reporting entity has communicated information to the AUSTRAC Chief Executive Officer (CEO), the reporting entity must not disclose to anyone other than the AUSTRAC CEO or a member of staff of AUSTRAC that the information has been communicated to the AUSTRAC CEO (see: section 123, Anti-Money Laundering and Counter-Terrorism Financing Act 2006 [Cth]).
Over the past four years, there has been a rapid increase in the number of SMRs submitted to AUSTRAC. In its 2019-20 Annual Report, AUSTRAC reported a 258 percent increase in SMRs since 2016-17, relating to the submission of approximately 265,000 SMRs in 2019-20 (see: page v, 2019-20 AUSTRAC Annual Report).
The rise in the number of SMRs submitted to AUSTRAC is partly driven by recent regulatory action, in which significant penalties have been imposed on reporting entities for a range of breaches. Of particular relevance were breaches involving a failure to report SMRs in accordance with legislative and regulatory requirements.
Given the increased focus on SMR submissions, combined with the consequences of non-compliance with reporting obligations, it is important for reporting entities to ensure they are submitting SMRs that align with legislative and regulatory requirements.
AUSTRAC's latest SMR resources clearly articulate expectations in relation to the completeness, accuracy and timeliness of SMR submissions. Specifically, AUSTRAC have emphasised that the following should be considered when creating an SMR:
Summarised below are the operational implications of AUSTRAC's guidance on each of the above SMR considerations.
Full visibility of suspicious activity: Ensure your SMRs contain the six essential key elements – who, what, where, when, why and how, in your SMR submission. Key information to include to ensure AUSTRAC and partner agencies can determine if a crime has been committed include:
Effective description of red flags: Outline all of the reasons for your suspicion, including potential indicators of money laundering, terrorism financing or other serious crime, in a logical and readable format. Red flags may include potential instances of:
Document an appropriate crime type keyword: Include the suspected or known crime type that is specific to the matter outlined in the submitted SMR e.g. money-laundering or insider trading.
Document ECDD actions performed and findings: Articulate the ECDD activities that were completed prior to submitting your SMR, as well as the results of these activities.
Include all relevant KYC information: Capture all information about the people connected to the suspicious activity in the appropriate fields and sections. Such information may include:
Clear and structured reporting: Poorly structured and unclear explanations can make further analysis difficult. When articulating grounds for suspicion:
Timely SMR submissions: The timeliness of an SMR submission impacts the ability of enforcement agencies to effectively detect and disrupt criminal activity. Late submissions may allow criminal activity to remain undetected, therefore permitting it to continue.
Suspicions related to terrorism financing are required to be submitted within 24 hours whist suspicions related to money laundering or any other offences are required to be submitted within 3 business days.
Non-compliance with suspicious matter reporting timeframes may expose an organisation to civil penalties and reputational damage. Additionally, such non-compliance may act as a precursor to further enforcement action.
Given the increased scrutiny over the reporting and compliance programs that reporting entities have in place to detect suspicious activity, it is important for reporting entities to be able to demonstrate that their SMR framework is robust, fit-for-purpose and implemented effectively. In particular, reporting entities may need to consider the following risk and operational factors in the context of the new SMR guidance:
For more information on AUSTRAC's SMR guidance please click here.
Authors: Samantha Carroll, Partner and Philip Hardy, Partner, Risk Advisory.
This publication is a joint publication from Ashurst Australia and Ashurst Risk Advisory Pty Ltd, which are part of the Ashurst Group.
The Ashurst Group comprises Ashurst LLP, Ashurst Australia and their respective affiliates (including independent local partnerships, companies or other entities) which are authorised to use the name "Ashurst" or describe themselves as being affiliated with Ashurst. Some members of the Ashurst Group are limited liability entities.
The services provided by Ashurst Risk Advisory Pty Ltd do not constitute legal services or legal advice, and are not provided by Australian legal practitioners in that capacity. The laws and regulations which govern the provision of legal services in the relevant jurisdiction do not apply to the provision of non-legal services.
For more information about the Ashurst Group, which Ashurst Group entity operates in a particular country and the services offered, please visit www.ashurst.com.
This material is current as at 04 June 2021 but does not take into account any developments after that date. It is not intended to be a comprehensive review of all developments in the law or in practice, or to cover all aspects of those referred to, and does not constitute professional advice. The information provided is general in nature, and does not take into account and is not intended to apply to any specific issues or circumstances. Readers should take independent advice. No part of this publication may be reproduced by any process without prior written permission from Ashurst. While we use reasonable skill and care in the preparation of this material, we accept no liability for use of and reliance upon it by any person.