Caltury Resource
SMR decision flowchart
Walk a possible suspicious matter through 10 decision points and out the other side as either a lodged SMR or a documented no-SMR record. References to s.41 of the AML/CTF Act 2006 throughout.
Reasonable-grounds in plain English
You suspect on reasonable grounds when, looking at the facts in front of you, an ordinary person doing your job would say “something is off and it could relate to one of the listed grounds”. You do not need proof, you do not need certainty and you do not need to know which specific offence. The threshold is meaningfully lower than “believe on reasonable grounds” and much lower than “beyond reasonable doubt”.
The reverse error (failing to lodge a borderline SMR) is the more expensive mistake. AUSTRAC has been clear that over-reporting is preferred to under-reporting on borderline matters.
The 10 decision points
Is the matter connected to a designated service?
Did this concern arise while providing, proposing to provide, or being requested to provide a designated service (as defined in sch.1 of the AML/CTF Act)?
YES
Continue to Decision 2.
NO
Section 41 obligations are not engaged. Document the concern in an internal note and stop. (Other obligations, e.g. under the Criminal Code, may apply but the SMR framework does not.)
AML/CTF Act s.41(1) — the SMR duty attaches to designated services.
Has something happened, been requested or been observed?
Has a customer (or prospective customer) done, asked for or made the firm aware of something specific that prompted the concern? A vague unease without an observable trigger is not enough.
YES
Continue to Decision 3.
NO
Record the unease in an internal note. Re-evaluate if anything specific emerges later. Do not lodge.
AML/CTF Act s.41(1)(d)–(f) — the duty is anchored to an act, request or matter, not a general feeling.
Could the matter relate to one of the listed grounds?
Could the matter relate, even possibly, to: tax evasion; proceeds of crime; financing of terrorism; an offence against any Commonwealth, State or Territory law; or the customer not being who they claim to be? (You do not need to know which one — only that the matter could relate to at least one.)
YES
Continue to Decision 4.
NO
Document the matter and the reason it does not relate to any listed ground. Do not lodge an SMR but retain the record.
AML/CTF Act s.41(1)(d) — the suspicion must relate to a listed ground.
Does a reasonable person in your position form a suspicion on these grounds?
Would a reasonable reporting entity, with the information you have, suspect that the matter relates to one of the listed grounds? You do not need certainty or proof; you need reasonable grounds.
YES
Continue to Decision 5.
NO
Document the analysis and the reason a reasonable person would not form the suspicion. Do not lodge but retain the record.
AML/CTF Act s.41(1)(d)–(f) — the test is ‘suspects on reasonable grounds’. Reasonable does not require proof; it requires more than mere speculation.
Did the suspicion form? (timing trigger)
If the answer to Decision 4 is yes, the suspicion has formed. The clock starts now. Record the date, time, who formed the suspicion and what they knew.
YES
Continue to Decision 6.
NO
If the question feels artificial because the suspicion has not yet formed, return to Decision 4 with whatever additional information you can reasonably obtain (without alerting the customer).
AML/CTF Act s.41(2) — the report timing is measured from when the suspicion forms, not from the underlying event.
Is the suspicion connected to terrorism financing?
Does the suspicion relate, in any way, to terrorism financing?
YES
Lodge the SMR within 24 hours of forming the suspicion. Continue to Decision 7.
NO
Lodge the SMR within 3 business days of forming the suspicion. Continue to Decision 7.
AML/CTF Act s.41(2)(a) — 24 hours for terrorism financing; (b) — 3 business days otherwise.
Internal escalation completed?
Has the matter been escalated to the AML/CTF Compliance Officer (or, if the Compliance Officer is the one who formed the suspicion, has a senior managing official been notified)?
YES
Continue to Decision 8.
NO
Escalate immediately. Do not delay lodgement waiting for sign-off — the statutory clock continues to run.
AML/CTF Act s.81 / s.82 — the Program must set out internal controls; AUSTRAC expects an escalation path.
Have you avoided tipping off the customer?
Has anyone disclosed to the customer (or to any third party other than AUSTRAC, the Compliance Officer or a legal adviser) that an SMR is being considered or has been lodged?
YES
STOP. Tipping off is a separate criminal offence. Brief senior management and seek legal advice on the consequences. Lodgement should still proceed.
NO
Continue to Decision 9.
AML/CTF Act s.123 — tipping-off offence. Maximum penalty: 2 years imprisonment for an individual.
Have you prepared the SMR content?
Does the draft SMR include: who you are; who the customer is; the designated service involved; what happened; when; why you suspect; the grounds on which the suspicion is based; and any supporting documents you can attach?
YES
Continue to Decision 10.
NO
Complete the draft. Quality of the SMR matters; AUSTRAC uses the narrative to triage.
AUSTRAC Online SMR form fields; AML/CTF Rules ch.18.
Lodge the SMR via AUSTRAC Online and close the loop
Has the SMR been lodged through AUSTRAC Online, the acknowledgement number recorded and the matter file annotated (without disclosing the SMR contents to the customer)?
YES
Done. Record the lodgement reference in the matter file under a restricted-access folder. Brief only those staff who need to know. Retain the record for 7 years.
NO
Lodge. The form is in AUSTRAC Online under Reports > Suspicious Matter Report. The acknowledgement appears immediately on submission.
AML/CTF Act s.107 — record-keeping; AUSTRAC Online lodgement workflow.
Worked scenarios
Scenario A — cash, real estate, no obvious explanation
Facts. A buyer offers to purchase a $1.2m residential property and asks to settle 40% in cash. The buyer is uncomfortable when asked about source of funds and offers a vague answer about ‘family savings overseas’. The buyer does not have an Australian ID and provides a foreign passport from a jurisdiction not on the FATF call-for-action list.
Verdict. Lodge. The cash request, source-of-funds discomfort and unverifiable narrative together meet the reasonable-grounds threshold for a suspicion that the matter relates to proceeds of crime or tax evasion. Lodge within 3 business days of forming the suspicion. Document the no-tipping-off requirement and ensure file notes do not disclose the SMR to the buyer.
Scenario B — conveyancing, unusual third-party funder
Facts. A conveyancing matter is proceeding normally when, two days before settlement, the buyer informs the conveyancer that an unrelated company will be transferring the deposit on their behalf. The buyer cannot explain the relationship and the company is registered in a tax haven.
Verdict. Lodge. The substitution of a third-party funder at the last moment, with no apparent relationship and an offshore corporate vehicle, meets the reasonable-grounds threshold. Lodge within 3 business days. Settlement may proceed only if the firm is comfortable that no sanctions match exists; otherwise it must be halted.
Scenario C — accounting, client wants company structure that smells off
Facts. A new client engages an accountant to form a Pty Ltd, immediately followed by a trust, and asks that nominees be used for the directorships. The client refuses to identify the beneficial owners and asks how to ‘keep their name off paper’.
Verdict. Lodge. The refusal to identify beneficial owners and the explicit desire to obscure ownership meet the reasonable-grounds threshold for proceeds of crime or tax evasion. Decline to provide the designated service unless and until KYC is complete, and lodge an SMR within 3 business days of forming the suspicion.
Scenario D — vague unease that does NOT support an SMR
Facts. A long-standing customer of a real estate agency lists a fifth investment property. The agent has a generalised sense that ‘something is up’ but cannot point to any act, request, document or omission that would support a suspicion.
Verdict. Do not lodge. The unease is not anchored to anything specific. Record the concern in an internal note for future reference. Re-evaluate if any concrete trigger emerges. Decision 2 in the flowchart stops the matter here.
Scenario E — terrorism financing concern (24 hour window)
Facts. A real estate agent receives funds from an account where the named account holder appears on a publicly available terrorism watch list. The matter has not yet settled.
Verdict. Lodge within 24 hours of forming the suspicion under s.41(2)(a). Do not contact the customer about the concern. Brief senior management. The 24-hour window is a hard limit — escalate immediately even if it falls over a weekend.
No-SMR record template
When the flowchart lands on a no-SMR outcome, document the reasoning. AUSTRAC may, on inspection, ask why a borderline matter was not lodged.
- Date the concern was raised and by whom.
- Description of the act, request or matter that triggered the concern (or, where the concern is generalised, the reason it remains generalised).
- Which listed ground (tax evasion, proceeds of crime, terrorism financing, other offence, identity concern) was considered.
- Reasoning for why a reasonable person would not form a suspicion at this point.
- Who reviewed the analysis (Compliance Officer or senior managing official).
- Date of the review and the conclusion: no SMR required.
- Trigger that would cause the matter to be re-evaluated.