An SMR isn’t the report you file once you’re sure a crime has happened. It’s the one you file when you can’t explain what’s in front of you, and a reasonable person in your position couldn’t either.
The test is just reasonable grounds to suspect, which is a lower bar than most people assume.
You don’t need proof, and you don’t need to turn out to be right. You need a suspicion that a reasonable person in your shoes would have formed from the same facts. A report is intelligence, not a verdict, and intelligence is allowed to be wrong.
I think the low bar is the whole point, not a flaw in it.
What trips the wire is usually pretty ordinary. The person isn’t quite who they say they are, or the money doesn’t have a story that holds together, or the deal has no commercial logic you can find, or the behaviour is just off in a way experienced people notice before they can explain it.
None of it proves anything on its own. It’s just where you stop being able to assume the innocent explanation.
Common indicators that meet the reasonable grounds threshold.
Then there’s the clock, which people get wrong because they assume it starts at the transaction.
It doesn’t. It starts when the suspicion forms, and that can be weeks later, in a file review, long after the deal closed. From there you have 3 business days, or 24 hours if what you’re looking at is terrorism financing.
One extension, and a narrow one: if you’re a lawyer and the report would contain something covered by legal professional privilege, you get up to 5 business days. It doesn’t stretch to terrorism financing, though. So privilege buys you a little room on most matters and none at all on the one that moves fastest.
SMR reporting timeframes under section 41(2).
Then the part everyone gets wrong.
In any normal business, when something about a client doesn’t add up, you go and ask them. Usually that’s the responsible thing to do, the decent thing even.
Here it’s the one move you can’t make.
Once you’ve formed a reportable suspicion, telling the client, hinting at it, even just changing how you act around them in a way they’d notice, any of it can be tipping off. And tipping off is criminal, not civil. It’s the part of the regime I’d train hardest on, exactly because the instinct it asks you to override is a good one.
Here’s the bit most of the advice out there hasn’t caught up to, by the way.
The tipping off rule changed back on 31 March 2025, before most of the reforms had even landed. So a lot of what’s written about it is describing a version of the law that basically isn’t in force anymore. The old one was close to a blanket ban: you couldn’t say anything that might let someone infer an SMR had been lodged.
What replaced it is narrower. It turns on harm rather than inference, so you’re on the wrong side of it only if the disclosure would, or could reasonably be expected to, prejudice an investigation.
Which sounds like more freedom than it is.
What it actually frees up are the disclosures firms always needed and could never make cleanly: to a consultant running your remediation, to your own lawyer for advice, within your reporting group, to law enforcement.
Telling the client was never on that list, and it still isn’t. You almost never know whether an investigation is running or whether a word from you would prejudice it, and the client is the one person it would most obviously be prejudiced by reaching.
So the safe posture hasn’t moved. You still don’t tell the client. What changed is that you can now talk properly to the people who are supposed to help you carry the risk.
The reformed tipping off offence (section 123) turns on harm, not inference.
In practice it’s calmer than it sounds.
Route suspicions to one person, so the judgment stays consistent and someone is actually watching the clock. Make sure everyone who deals with clients can recognise the triggers, and knows that the response to a suspicion is internal, not a conversation with the customer. Write the grounds down while they’re fresh, because the report has to explain them, and one day you might have to as well.
And the whole time, you keep treating the client exactly as you did before.
The firms that come unstuck here are almost never the ones that miss something.
They’re the ones that catch it, feel the pull to go and sort it out with the client face to face, and follow it. Missing a report is usually survivable. Tipping off is the one with the prison term attached, and it starts with an ordinary, well-meant conversation.
The bottom line. Report on reasonable suspicion: 3 business days, or 24 hours for terrorism financing. Route it to one person, keep it internal, and don’t tell the client. Missing a report is a civil penalty. Tipping off is a criminal offence.
The regulatory detail
What an SMR is and when it is required
Source: AML/CTF Act 2006 (Cth) s41. The obligation to maintain reporting policies sits in the AML/CTF program requirements at s30(2). See also AML/CTF Rules 2025 (Cth, F2025L01026) s9-3.
An SMR is required if, while providing or proposing to provide a designated service, you suspect on reasonable grounds that the customer is not who they claim to be, or that the provision of the service relates to money laundering, terrorism financing, proliferation financing, proceeds of crime, or an offence against a law of the Commonwealth, a State or a Territory, or that information may be relevant to the investigation or prosecution of such an offence (s41(1)).
“Reasonable grounds” is an objective standard. A reasonable person in your position, on the facts and information you know or could reasonably be expected to know at the time, would form the suspicion. It requires more than vague unease and less than proof.
The obligation can arise even if you decline the service. Being asked about, or proposing to provide, a designated service is enough to bring you within scope.
Reporting timeframes
Source: AML/CTF Act 2006 (Cth) s41(2). The reporting clock runs from when the suspicion is formed, not from when the transaction occurs.
3 business days after forming the suspicion for money laundering, proceeds of crime and other offences (s41(2)(a)).
24 hours after forming the suspicion for terrorism financing (s41(2)(b)).
Legal professional privilege extension: where you claim the SMR includes information protected by legal professional privilege, you have up to 5 business days after the day you form the suspicion. This applies even where part of the privileged information belongs to a person other than the reporting entity. It does not apply where the suspicion relates to terrorism financing. Source: AML/CTF Act 2006 (Cth) s26F(4)(e) and s30(2)(a); AML/CTF Rules 2025 s5-12.
Tipping off
Source: AML/CTF Act 2006 (Cth) s123, as replaced by Schedule 5 of the AML/CTF Amendment Act 2024 (Act No. 110 of 2024). This provision commenced on 31 March 2025, ahead of the main reform commencement on 1 July 2026.
The offence: a person to whom the section applies commits an offence by disclosing protected information to another person where the disclosure would, or could reasonably be expected to, prejudice an investigation of an offence against a law of the Commonwealth, a State or a Territory. The former formulation based on “reasonable inference” that an SMR had been lodged was removed.
Protected information includes information that an SMR has been or is required to be submitted, any report prepared for the purpose of meeting an SMR obligation, any document purporting to set out information contained in an SMR, information about notices given under s49 or s49B of the Act, and information about suspect transaction reports made under the now repealed Financial Transaction Reports Act 1988 (Cth).
Disclosures that would not, and could not reasonably be expected to, prejudice an investigation are not prohibited. The reform was intended to permit legitimate sharing, including within a reporting group, to a consultant assisting with AML/CTF remediation, uplift or an independent review, to a lawyer for advice on AML/CTF obligations, to participants in Fintel Alliance activities, and to Australian law enforcement, intelligence and regulatory agencies. Asking a customer reasonable questions or conducting enhanced customer due diligence before any SMR obligation has arisen is not tipping off.
Not prohibited is not the same as authorised. Other laws, including the Privacy Act 1988 (Cth), may still restrict a disclosure.
Penalty: a criminal offence carrying a maximum of 2 years imprisonment, 120 penalty units, or both.
Penalties and penalty units
Failure to comply with a reporting obligation is a civil penalty contravention of the AML/CTF Act. Maximum civil penalties extend to 100,000 penalty units for a body corporate and 20,000 penalty units for an individual.
A penalty unit is a fixed dollar amount set under the Crimes Act 1914 (Cth). It was 330 dollars from 7 November 2024. Penalty units are reindexed on 1 July 2026, which changes the dollar value while the unit counts in the Act stay fixed. For the dollar figure on any given date, multiply the current unit value by the unit count.
Key dates
31 March 2025: the reformed tipping off offence (s123) commenced.
31 March 2026: AUSTRAC enrolment opens; reform program framework changes take effect for existing reporting entities.
1 July 2026: Tranche 2 obligations commence for newly captured entities; penalty units are reindexed; entities not on the Reporting Entities Roll on 30 March 2026 use the new SMR form.
29 July 2026: Tranche 2 enrolment deadline, within 28 days of first providing a designated service.
FATF
FATF Recommendation 20 (reporting of suspicious transactions) and Recommendation 21 (tipping off and confidentiality). Recommendation 23 extends these reporting measures to designated non-financial businesses and professions, including legal professionals, accountants and real estate agents.
Frequently asked questions
Do I have to lodge an SMR even if I don’t take on the client?
Yes. The obligation attaches to the suspicion, not to whether you end up providing the service. If you form a suspicion on reasonable grounds while providing, proposing to provide, or being asked about a designated service, you must report, even if you decline the work.
When does the reporting clock start?
When you form the suspicion, not when the transaction happens. If the suspicion forms during a later file review rather than at the time of the deal, the deadline runs from that point.
Can I ask the client about a transaction before I decide whether to report?
Generally yes, if you have not yet formed a suspicion that triggers an SMR. Asking reasonable questions and conducting customer due diligence is part of the job and is not tipping off. Once a reporting obligation has arisen, raising it with the client is where the risk sits.
Has the tipping off rule changed?
Yes. From 31 March 2025 the offence is narrower and harm-based. It applies where a disclosure would, or could reasonably be expected to, prejudice an investigation. It gives more room to share with consultants, your own lawyer, your reporting group and law enforcement. It does not make it safe to tell the client.
What is the penalty for tipping off?
Tipping off is a criminal offence with a maximum of 2 years imprisonment, 120 penalty units, or both. That is separate from the civil penalties that apply to failing to report.
HP-KYC, the AML/CTF tool from Homepedia (an enrolled reporting entity), keeps your customer due diligence, monitoring and reporting records structured and retrievable for AUSTRAC. [link to homepedia.com.au product page]
Sources
- Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth)
- AML/CTF Rules 2025 (Cth, F2025L01026)
- AUSTRAC, Suspicious matter reports (Reform)
- AUSTRAC, Tipping off
- AUSTRAC, New tipping off offence now in effect
- Department of Home Affairs, Overview of the AML/CTF Amendment Act
- Law Society of NSW, AML/CTF Hub
- FATF, International Standards on Combating Money Laundering (Recommendations)
This is general information about Australian AML/CTF obligations, not legal advice. Verify the current legislation and AUSTRAC guidance for your situation.
