What Is a Suspicious Matter Report & When Do Reporting Entities Need to Submit One?

Introduction

A Suspicious Matter Report (SMR) is a report to the Australian Transaction Reports and Analysis Centre (AUSTRAC) made by a reporting entity when it has reasonable grounds to suspect matters connected with a designated service, including money laundering (ML), terrorism financing (TF), other offences, or false identity. The obligation can arise when a service is provided, proposed, requested, or merely discussed, and does not require proof that a crime has occurred.

This article explains the reasonable grounds test for reporting entities, when an SMR must be submitted, and the 24-hour and 3-business-day deadlines. It also covers the post-1 July 2026 SMR forms, internal escalation, and confidentiality obligations, including the tipping off offence.

Interactive Tool: See If You Must File an SMR & When It’s Due

Understanding Suspicious Matter Reports under the AML/CTF Act

Who Must Submit an SMR?

Under Section 41(1)(a)–(c) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) ('AML/CTF Act'), the service-related limb of the SMR obligation is satisfied when the reporting entity:

• commences to provide a designated service;
• proposes to provide a designated service; or
• is asked to provide a designated service.

The obligation can also arise when a person inquires whether the reporting entity is willing or prepared to provide a designated service that it ordinarily provides.

Under Section 41(1)(a)–(c), the obligation may apply even if the designated service is never provided. This can include a request to open an account or an inquiry about obtaining a designated service. An SMR obligation arises only where one or more of the suspicion conditions in Section 41(1)(d)–(j) is also satisfied, as explained in the next section.

What Types of Suspicion Can Trigger an SMR?

Under Section 41(1)(d)–(j) of the AML/CTF Act, an SMR may be required where a reporting entity suspects on reasonable grounds that a customer or the customer's agent is not who they claim to be.

The obligation may also arise where information connected with a designated service may assist the investigation or prosecution of:

• tax evasion or another Commonwealth, state or territory offence;
• money laundering or terrorism financing; or
• an offence involving proceeds of crime.

The relevant suspicion may concern the provision or proposed provision of the designated service.

What Are "Reasonable Grounds for Suspicion"?

Section 41(1)(d)–(j) of the AML/CTF Act requires the reporting entity to ‘suspect on reasonable grounds’. AUSTRAC guidance describes reasonable grounds as an objective standard. It asks whether a reasonable person in the reporting entity's position would form the relevant suspicion after considering the facts, circumstances, and information available at the time.

The available information includes material the reporting entity knows or could reasonably be expected to know. AUSTRAC guidance states that the reporting entity should be able to explain its suspicion so that a reasonable person with similar knowledge, experience, or training would likely reach the same conclusion. Absolute certainty or proof that a crime occurred is not required.

Common Suspicious Matter Indicators for Reporting Entities

Examples of Unusual Customer Behaviour & Transactions

Reporting entities should monitor customer behaviour, identification information and transactions for indicators of suspicious activity. Common indicators include:

• Unusually large, complex, frequent or rapid transactions.
• Activity that does not match the customer's profile.
• Inconsistent customer information or identification documents that appear altered.
• An unexplained source of funds or source of wealth.
• Transfers involving third parties, higher-risk countries or sanctions-listed persons.
• Transactions divided into amounts under $10,000, known as structuring.
• A customer who refuses to provide information, gives vague answers or wants to remain anonymous.

One indicator alone may have a legitimate explanation. Multiple indicators may need to be assessed together, taking account of the available information and circumstances.

Does a Red Flag Automatically Require an SMR?

A red flag does not automatically require an SMR. AUSTRAC guidance states that reporting entities should assess unusual behaviour and transactions and review relevant information when determining whether reasonable grounds for suspicion exist. Separately, Section 32 of the AML/CTF Act specifies the circumstances in which enhanced customer due diligence is legally required, including under Section 32(b) where an SMR obligation arises in relation to the customer and the reporting entity proposes to continue providing designated services. 

As explained above, the obligation under Section 41 of the AML/CTF Act arises once the entity forms the relevant suspicion on reasonable grounds; certainty that a crime occurred is not required.

For a practical way to review AML/CTF controls and suspicious activity processes, see AML/CTF Compliance Checklist (Free).

How Quickly Must an SMR Be Submitted?

Statutory Deadlines for Terrorism Financing & Other Suspicions

Under Section 41(2)(a)–(b) of the AML/CTF Act, a reporting entity must submit an SMR to the AUSTRAC CEO within:

• 24 hours after forming the suspicion if it relates to TF.
• 3 business days after the day the suspicion is formed for other matters, including ML or other offences.

The deadline starts when the reporting entity forms the relevant suspicion on reasonable grounds. A report must be submitted in the approved form and include the required information and the grounds for suspicion.

Timeframes When Claiming Legal Professional Privilege

Under Section 41(2)(aa) of the AML/CTF Act, the reporting entity may have 5 business days after forming the suspicion to submit an SMR. This applies where it reasonably believes that some, but not all, required information may be protected by legal professional privilege belonging to another person.

This 5-business-day timeframe does not apply to suspicions relating to TF. If all information forming the grounds for suspicion is reasonably believed to be privileged, Section 41(2A) of the AML/CTF Act may allow the reporting entity to refuse to submit the report.

What Should a Business Do Before Submitting an SMR?

Who Should Decide Whether an SMR Is Submitted?

An AML/CTF policy should identify who reviews suspicious activity, who decides whether reasonable grounds for suspicion exist, and who submits the SMR, with AML/CTF compliance lawyers able to help establish those processes where needed. In addition, customer-facing personnel should be trained to recognise unusual behaviour and refer concerns to the appropriate person or team.

The responsible decision-maker may be the sole trader, an AML/CTF compliance officer, or a dedicated team in a larger organisation. Policies should also set out:

• how alerts are prioritised according to risk;
• how concerns are escalated; and
• how relevant information can be accessed without creating information silos.

The review should occur as soon as practical, so the business can meet the applicable reporting deadline.

What Should Be Included in an SMR?

An SMR should provide clear, accurate and useful information about the suspicion. Under Section 41(3) of the AML/CTF Act, the report must:

• be in the approved form;
• contain the information specified in the applicable Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (Cth) ('AML/CTF Rules'); and
• state the grounds for suspicion.

The information required for an SMR is prescribed by Rules 9-2, 9-3 and 9-4 of the AML/CTF Rules. The current AUSTRAC form requires information such as:

• the business, report date and date the suspicion was formed;
• the person completing the report and the person who can explain the suspicion;
• the suspicious activity, designated services, accounts and transactions; and
• the person or entity connected with the suspicion.

The grounds should use plain English and explain who, what, where, when, why and how. Since 1 July 2026, entities enrolled after 30 March 2026 must use the new SMR form. Under Rule 12-2 of the AML/CTF Rules, entities that were already entered on the Reporting Entities Roll at commencement may continue using the former form or transition to the new form until the earlier of 30 March 2029, or a day specified by the AUSTRAC CEO by notifiable instrument under Rule 12-2(3).

Post-Submission Actions & Understanding the Tipping Off Offence

Managing Ongoing Customer Relationships & ML/TF Risks

Submitting an SMR does not automatically require a reporting entity to end its relationship with a customer. The business may continue providing designated services, but it must appropriately manage any ML/TF risks.

If the business continues providing designated services after submitting an SMR, it must conduct enhanced customer due diligence in line with its AML/CTF policies. Controls for a high-risk customer may include:

• limiting access to certain channels, services or transaction thresholds;
• increasing monitoring of the customer's transactions and behaviour.

If the business cannot appropriately manage the risks, it should consider whether to continue providing designated services.

Can You Tell a Customer That an SMR Has Been Filed?

No. Under Section 123(1)–(3) of the AML/CTF Act, a person covered by Section 123(1)(a) commits the tipping-off offence where they disclose information covered by Section 123(2) to another person, apart from an AUSTRAC entrusted person, and the disclosure would or could reasonably be expected to prejudice an investigation. 

It is immaterial under Section 123(3) whether an investigation has commenced. Accordingly, disclosing to a customer or associate that an SMR has been or is required to be submitted may constitute tipping off where those statutory elements are satisfied.

The maximum penalty under Section 123 of the AML/CTF Act is imprisonment for 2 years or 120 penalty units, or both.

Can SMR Information Be Shared Internally or Externally?

SMR information may be shared internally or with external providers to manage ML/TF risks, meet AML/CTF obligations, or obtain legal advice. Such disclosure is permitted provided it would not or could not reasonably be expected to prejudice an investigation. As a best practice, internal access should be limited to people with a genuine need to know.

External disclosures do not receive automatic approval merely because they assist the business. In addition, reporting entities should consider the recipient's confidentiality controls, any foreign legal obligations, and conditions preventing the information from reaching the customer or another person connected with the matter. 

Section 123(5) of the AML/CTF Act provides for an exception for certain disclosures between reporting entities, subject to conditions prescribed by regulations. AUSTRAC's current guidance states that this exception is not yet operational because the required regulations have not yet been developed and brought into force.

Common SMR Mistakes

Common mistakes include treating a red flag as automatically requiring an SMR, or waiting for proof that ML/TF or another offence occurred. The reporting entity must instead assess the available information and decide whether reasonable grounds for suspicion exist — certainty is not required.

Other common mistakes include:

• delaying internal escalation after suspicious activity is identified;
• submitting vague grounds without explaining who, what, where, when, why and how;
• missing the 24-hour or 3-business-day deadline under Section 41(2)(a)–(b) of the AML/CTF Act; and
• telling a customer or associate about an SMR, which may breach Section 123 of the AML/CTF Act.

Practical Steps for Reporting Entities

Reporting entities should use AML/CTF policies that set out how suspicious activity is identified, reviewed and escalated. Customer-facing personnel should know who receives concerns, while the responsible person or team should assess reasonable grounds as soon as practical.

A useful SMR checklist should cover:

• recording relevant indicators, customer information and transaction details;
• documenting the assessment and decision;
• tracking the applicable reporting deadline;
• submitting the SMR through AUSTRAC Online; and
• limiting SMR information to people with a genuine need to know, supported by staff training, secure records and controlled disclosures.

For further guidance, see AML/CTF Rules 2025 Free Guide – Tranche 2 & Existing Reporting Entities.

Conclusion

A SMR alerts AUSTRAC to potential money laundering, terrorism financing and other crime when a reporting entity forms reasonable grounds for suspicion connected with a designated service; proof that an offence occurred is not required. Under Section 41 of the AML/CTF Act, reporting entities must meet the applicable deadline and use the correct form.

For help reviewing your SMR procedures, deadlines and confidentiality controls, contact the AML/CTF compliance lawyers at Click Legal. Our regulatory lawyers can help your business understand its obligations and apply clear processes for assessing and submitting SMRs.

Frequently Asked Questions