Suspicious Matter Report: What Accountants Must Lodge

A suspicious matter report tells AUSTRAC about a reasonable suspicion arising from a designated service. Your accounting practice must lodge one when the legal test is met, even if the prospective client leaves. Keep the reporting decision separate from what you tell the client.

The Suspicious Matter Report and Who Lodges It

A suspicious matter report (SMR) is a reporting entity’s report to AUSTRAC about a suspicion on reasonable grounds arising from a designated service. AUSTRAC uses reports as financial intelligence. Lodging one does not accuse the client of a proven offence.

An accounting practice has this duty when its services fall within the designated-service rules and have the required Australian geographical link. Being an accountant alone does not put every engagement within those rules. The expanded obligations are already in force for covered accounting services after the commencement boundary for newly regulated businesses.

For each concern, identify the designated service your practice provides or proposes to provide. Put the escalation and reporting responsibilities in your AML/CTF program.

When the Reporting Duty is Triggered

Reasonable grounds means a reasonable person in your position would suspect wrongdoing from the information and circumstances available. A feeling alone needs examination. Proof of a completed crime is unnecessary.

The grounds can concern a false identity, money laundering, terrorism financing, tax evasion or proceeds of crime. Suspicion can arise at first enquiry, during onboarding or while you carry out the service. A prospective client who abandons a proposed designated service after questions can still require a report.

Your identity checks help establish what the available evidence means. Record both the facts that raise the concern and any credible explanation. Do not postpone a formed suspicion until a partner meeting or the end of enhanced customer due diligence.

Warning Signs in Accounting Work

Warning signs require you to assess the client’s conduct in context. AUSTRAC’s accountant risk indicators describe circumstances such as these. Each practice example below is fictional.

Indicator	What it could look like in your practice
Money arrives from unrelated third parties without a legitimate reason	A client seeking company formation cannot explain why an unrelated entity provides the establishment funds.
The client makes beneficial ownership hard to establish	An intermediary supplies nominee details while refusing to identify the person who ultimately owns or controls the entity.
Complex ownership has no economic reason	A client requests several cross-border companies but cannot explain what any will do.
Funds do not match the client’s known activities	A small trading business proposes transfers far above its expected turnover without supporting records.
The client wants rapid transactions without a reason	The client presses you to arrange an immediate transfer before you understand its purpose.

A Scenario That Meets the Test

In this fictional example, a prospective client asks your practice to form a company. An unrelated entity supplies its funds. The client gives conflicting explanations about ownership and asks for documents to conceal the actual funder. Those combined facts support a reasonable suspicion that the proposed service will hide criminal proceeds. Record when that suspicion forms and lodge the SMR within the applicable deadline, even if the client withdraws.

A Scenario That Does Not Meet the Test

Another fictional client receives funding from a director’s related company. The client supplies the loan agreement and bank records. The ownership records agree with the explanation, and the proposed business activity accounts for the payment. On those facts alone, an unfamiliar payment does not establish reasonable grounds. Record the explanation and continue monitoring under your program.

Staff must send concerns promptly through the practice’s confidential escalation channel. Give the compliance officer the observed conduct and supporting records. Record when staff first identify the issue and when a suspicion forms. The practice must assess concerns as soon as practicable. Its escalation chain must not reset an existing reporting deadline.

Deadlines for Lodging an SMR

AUSTRAC requires lodgement within 24 hours of forming the suspicion if related to terrorism financing. For other suspicions, the deadline is 3 business days after the day you formed the suspicion. These are the published SMR deadlines.

A report that includes a claim of legal professional privilege has a separate five-business-day period for a non-terrorism suspicion. The claim must meet the legal professional privilege requirements. Ordinary accountant-client confidentiality does not create that privilege.

Start the clock when the suspicion forms, not when someone later reviews the file. Record the actual time for a terrorism financing concern. Assign a reporting officer and a backup so leave or internal approval does not cause a missed deadline.

How to Lodge an SMR in AUSTRAC Online

Lodge the SMR through the practice’s AUSTRAC Online account. The reporting user needs access to the reporting function and the case records. AUSTRAC’s SMR form instructions explain the screen sequence.

1. Open Reporting, then Make a Report. Choose Report SMR and Start single report.
2. Enter the reporting business and the person responsible for the report. Record when the suspicion forms.
3. Add the parties before their associations and related transactions. Distinguish the client, beneficial owner, intermediary and other entities. Enter known identifiers without guessing missing facts.
4. Describe the designated service and the relevant transactions or activity. Include the actual amounts, account details and event times that explain the concern.
5. Write the grounds for suspicion. State the concern first, then explain the events in order and why the explanation fails to account for them.
6. Add relevant supporting documents where the form permits attachments. Keep the narrative understandable without making the analyst infer the concern from an attachment.
7. Resolve incomplete sections, review the summary and submit. Download or view the acknowledgement from the reporting dashboard. A saved draft is not a lodged report.

For the company-formation example, begin the narrative with the unexplained third-party funding and conflicting ownership instructions. Describe who gave each instruction and which records contradict it. Separate what staff observed from what they infer. Use actual case details in a real report, including dates needed by the form.

Keep the submitted report, receipt and supporting documents in restricted storage. Retain the escalation trail, decision reasons and deadline calculation. AUSTRAC’s record-keeping guidance sets different starting points for the seven-year periods. AML/CTF program records remain for seven years after they cease to be relevant to demonstrating compliance.

For customer due diligence records, keep them for seven years after the business relationship ends or an occasional transaction completes. Do not assume every related record expires seven years after lodgement.

Tipping Off and What You Can Still Tell the Client

Tipping off occurs when protected information is disclosed in circumstances that would or could reasonably be expected to prejudice an investigation. Section 123 of the AML/CTF Act protects information that an SMR has been lodged or is required, and the report’s contents. The rule also applies before an investigation starts.

Do not tell the client that you have lodged or may need to lodge an SMR. Keep routine questions factual and give genuine reasons for requesting information. Do not invent a technical fault to hide the reporting decision.

An admin team member can use this original sample wording when it matches the situation:

We need more information to complete our client checks. The accountant reviewing your file will explain what documents are still required.

Lodgement does not automatically end the engagement. If you continue the designated service, apply enhanced customer due diligence. If you end the engagement, use a genuine reason, such as being unable to obtain required client information. Have the compliance officer review the communication for tipping off risk.

AUSTRAC’s tipping off guidance allows for necessary internal risk management and seeking legal advice where disclosure does not prejudice an investigation. Sharing within a reporting group is not a blanket exemption. Limit information to people who need it, protect access and consider other confidentiality laws. The separate section 123(5) information-sharing exception between reporting entities depends on regulations that AUSTRAC says are not yet in operation.

Protection for Reporters and SMR Training

Section 235 of the AML/CTF Act protects reporting entities and their staff from liability for acts done in good faith to meet its requirements. That includes good-faith reporting. The protection has statutory exceptions, including proceedings for offences under the Act and specified enforcement proceedings. It does not excuse knowingly false reporting.

The TPB’s confidentiality duty permits disclosure when a legal duty requires it. The TPB expressly identifies AUSTRAC reporting obligations as an example. You do not need client permission to meet that duty. Keep other disclosures within the Code of Professional Conduct’s confidentiality rules.

Use suspicious matter report training to practise the decision and the communication. Give staff the two fictional scenarios above without their conclusions. Ask them to identify the designated service, explain the evidence and record whether reasonable grounds exist. Then add a terrorism financing concern and ask them to calculate the deadline from the time the suspicion forms.

Have the reporting officer prepare a fictional report in AUSTRAC’s training environment. Use invented information only. The expected result is a complete practice report, a correct reporting deadline and a client response that reveals no SMR decision. Review the exercise against your program and correct any missed escalation or disclosure before staff handle a real case.