Introduction
Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) compliance is essential for Australian accountants as they become designated reporting entities under the expanded Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) from 1 July 2026. This shift reflects the critical role accountants play in safeguarding Australia’s financial system by identifying and managing risks related to money laundering and terrorism financing.
This guide offers a comprehensive checklist of AML/CTF risks and red flags tailored specifically for accounting professionals operating in the current regulatory environment, including the upcoming Tranche 2 reforms. It aims to equip accountants with practical tools to conduct effective risk assessments, recognise warning signs during client onboarding and transactions, and ensure ongoing compliance with Australian Transaction Reports and Analysis Centre (AUSTRAC)’s requirements.
Understanding AML/CTF Risks & Red Flags for Australian Accountants
Why Accountants Are Targeted for Money Laundering & Terrorism Financing
Accountants are particularly vulnerable to exploitation by criminals due to several key factors:
- Financial Expertise: Their knowledge of financial systems, corporate law, and tax regulations enables them to facilitate complex financial arrangements that can obscure the origins of illicit funds.
- Direct Access to Client Funds: Accountants often manage sensitive financial transactions, including trust accounts and company or trust formations, which are critical stages in the money laundering cycle.
- Gatekeeper Role: As gatekeepers within the financial system, accountants can inadvertently open pathways for significant illicit financial flows if compromised or negligent.
Criminals specifically target accountants to create complex ownership structures, such as shell companies or trusts, which conceal beneficial ownership and complicate regulatory scrutiny.
For example, an accountant managing trust accounts and assisting with company formations might unknowingly facilitate transactions involving offshore entities or nominee directors designed to hide the true owners of illicit funds. This risk increases when clients pressure for rapid onboarding or avoid disclosing source of funds and beneficial ownership details.
Key AML/CTF Obligations for Accountants Under Tranche 2
From 1 July 2026, Australian accountants will be subject to expanded AML/CTF obligations under the Tranche 2 reforms, reflecting their designation as reporting entities under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth). These reforms impose a comprehensive compliance framework tailored to the specific risks accountants face.
Key obligations include:
| Obligation | Key Requirements |
|---|---|
| Enrolment & Registration with AUSTRAC | Accountants providing designated services must enrol with AUSTRAC by July 2026. |
| Risk Assessments | Firms must conduct and document thorough, risk-based assessments of their services, clients, and jurisdictions, to be reviewed regularly and approved by senior management. |
| Customer Due Diligence | Implement robust Customer Due Diligence (CDD) processes, including identity verification and conducting enhanced due diligence (EDD) for high-risk clients like Politically Exposed Persons (PEPs). |
| Ongoing Monitoring | Continuously monitor client transactions and activities to detect unusual or suspicious behaviour, updating risk profiles as needed. |
| Reporting Obligations | Submit Suspicious Matter Reports (SMRs) for suspected illicit activities and Threshold Transaction Reports (TTRs) for cash transactions of AUD 10,000 or more within specified timeframes. |
| Record-Keeping | Securely maintain comprehensive records of all AML/CTF compliance activities (e.g., risk assessments, CDD, transactions, reports) for a minimum of seven years. |
| AML/CTF Program | Develop and maintain a tailored AML/CTF program with appropriate policies, controls, and staff training, and appoint a fit and proper AML/CTF Compliance Officer. |
The Tranche 2 reforms recognise the unique challenges accountants face compared to traditional financial institutions. Accountants engage with diverse clients and provide complex services that carry inherent money laundering and terrorism financing risks. Therefore, compliance programs must be specifically tailored, incorporating sector-specific guidance and leveraging technology solutions where appropriate.
For example, an accounting firm advising clients with offshore structures or managing trust accounts must apply EDD measures, including verifying ultimate beneficial ownership and screening against PEP and sanctions lists. The firm should also monitor transactions for patterns indicative of layering or integration of illicit funds, such as circular payments or rapid fund movements without clear economic rationale.
Failure to comply with these expanded obligations can result in significant penalties, including fines and reputational damage. Hence, accountants must proactively prepare by conducting gap analyses, adopting AML/CTF software tools, and ensuring comprehensive staff training focused on the new regulatory landscape.
Get Your Free Initial Consultation
Request a Free Consultation with one of our experienced AML Lawyers today.
Client Onboarding: AML/CTF Red Flags
Red Flags in Identification & Verification
During the critical client onboarding stage, accountants must be vigilant for issues related to identification and verification, as these can be early indicators of potential money laundering or terrorism financing. A primary concern arises when a client is reluctant to provide complete or satisfactory Know Your Customer (KYC) information or documentation. This reluctance may signal an attempt to conceal their true identity or the identity of beneficial owners, thereby hindering the due diligence process.
Further red flags in this area include:
| Red Flag | Potential Indication / Why It’s a Concern |
| Reluctance to provide KYC information | The client is reluctant to provide complete or satisfactory Know Your Customer (KYC) information or documentation. |
| Suspicious documentation | The client provides identification documents that appear forged, altered, expired, or are of poor quality. |
| Inconsistent information | Information supplied by the client is inconsistent across different documents or contradicts other available information. |
| Evasion on source of funds/wealth | The client is unwilling to disclose, or provides unclear, unusual, or unverifiable explanations for their source of funds or wealth. |
| Obscured physical presence | The client uses P.O. boxes, virtual offices, or mail forwarding services as a primary address without a valid justification. |
| Difficulty verifying beneficial owners | The client is unwilling to disclose beneficial ownership details, or the provided information makes it challenging to verify the UBO. |
Complex Ownership & Corporate Structures
The use of complex ownership and corporate structures by a client can be a significant red flag for accountants, potentially indicating an attempt to obscure beneficial ownership or facilitate money laundering and terrorism financing. These structures often involve multiple layers of entities, making it difficult to trace the flow of funds and identify the true individuals in control. Accountants should be particularly cautious when a client employs such structures without a legitimate commercial or economic reason.
Specific indicators of risk related to complex structures include:
| Red Flag | Potential Indication / Why It’s a Concern |
| Opaque arrangements | Clients use multiple layers of shell companies, trusts, or other offshore entities. |
| Use of nominees | The client uses nominee shareholders or directors without a clear commercial purpose. |
| Frequent and unexplained changes | There are rapid or frequent alterations in the company’s directors, shareholders, or beneficial ownership. |
| Shell companies | The client uses shell companies that have no real business activity, operational presence, or economic substance. |
| Rapid formation of multiple entities | A client quickly establishes numerous entities with identical or very similar structures. |
| Refusal to disclose UBOs | A client is unwilling or unable to provide clear information about Ultimate Beneficial Owners (UBOs). |
| Layered cross-border structures | The client uses intricate international structures for local business or without clear commercial justification. |
These complexities demand thorough investigation and documentation by the accountant to assess the potential AML/CTF risk.
High-Risk Client Profiles & Geographic Connections
Certain client profiles and geographic connections inherently carry a higher risk of involvement in money laundering or terrorism financing, requiring accountants to apply EDD. Identifying these high-risk indicators at the onboarding stage is crucial for effective AML compliance.
Key areas of concern include:
| Red Flag | Potential Indication / Why It’s a Concern |
| Politically Exposed Persons (PEPs) | The client is a PEP, or has close family or business associations with a PEP, presenting an elevated risk of corruption or misuse of public funds. |
| Links to high-risk or sanctioned jurisdictions | The client is based in, deals with, or routes transactions through jurisdictions known for corruption, weak AML/CTF controls, or sanctions. |
| Unexplained wealth or unusual business activities | The client’s source of funds/wealth is unclear, difficult to verify, or inconsistent with their known age, occupation, or business profile. |
| Involvement in high-risk industries | The client is involved in an industry known to be vulnerable to money laundering (e.g., cash-intensive businesses) without robust controls. |
| Negative adverse media | Credible media reports link the client or their associates to criminal activity, fraud, or regulatory sanctions, significantly elevating their risk. |
| No logical reason for services in the jurisdiction | A non-resident client seeks services in Australia with an unclear or unconvincing rationale for doing so. |
Behavioural & Communication Red Flags
During client onboarding, certain behaviours and communication patterns exhibited by a potential client can serve as important red flags, suggesting a higher risk of money laundering or terrorism financing. These indicators often point to attempts to evade scrutiny, conceal information, or manipulate the accountant.
Accountants should be alert to the following behavioural and communication red flags:
| Red Flag | Potential Indication / Why It’s a Concern |
| Unusual urgency or pressure | The client may be attempting to bypass thorough due diligence checks by rushing the process. |
| Avoidance of in-person meetings | An unwillingness to meet face-to-face can be suspicious and may hinder proper identity verification. |
| Use of intermediaries without clear reason | The client may be using an agent or third party to obscure their identity or avoid direct scrutiny. |
| Preference for informal communication | The client may be trying to avoid creating a formal, documented audit trail of their instructions and requests. |
| Evasiveness or nervousness | The client is unusually nervous or defensive when asked standard questions, suggesting they may be hiding something. |
| Lack of interest in services | The client seems more focused on moving funds or creating structures than the actual service, using the firm as a means to an illicit end. |
| Frequent changes in professional advisors | Can be a sign of “opinion shopping” (seeking a compliant professional) or a problematic history with other firms. |
| Inquiries about AML/CTF thresholds | Suggests the client is planning to structure transactions or otherwise circumvent detection and reporting. |
| Offers of unusually high fees | Could be a bribe or an attempt to gain favour to expedite processes or have controls overlooked. |
| Pressure to bypass standard checks | A significant red flag indicating the client explicitly wants to avoid the firm’s standard due diligence procedures. |
Transactional & Bookkeeping Red Flags
Unusual Transaction Volumes & Patterns
Accountants should be vigilant for sudden or unexplained spikes in transaction volume or value that do not align with the client’s known business profile or industry norms. Such anomalies may indicate attempts to place or layer illicit funds.
Common patterns include:
| Red Flag | Potential Indication / Why It’s a Concern |
| Sudden spikes in transaction volume/value | Sudden or unexplained increases in transaction activity that do not align with the client’s known business profile or industry norms. |
| Structured transactions | Transactions are structured just below reporting thresholds (e.g., multiple cash deposits under A$10,000). |
| Rapid movement of funds | Funds are moved rapidly between different accounts or across jurisdictions without a clear business rationale. |
| Unusual use of cash | There are frequent or large cash transactions in a business that typically does not handle much cash. |
| Transactions lack purpose | Transactions have no apparent economic or commercial purpose. |
For example, a client who suddenly increases transaction frequency or value without a corresponding change in business operations should prompt further inquiry and EDD.
Use of Multiple Accounts & Third Parties
Clients operating multiple bank accounts without legitimate business reasons present a significant red flag. This behaviour can complicate financial trails and facilitate money laundering.
Key indicators include:
| Red Flag | Potential Indication / Why It’s a Concern |
| Use of multiple accounts | The client uses multiple domestic or foreign bank accounts with no clear business justification. |
| Payments involving third parties | Payments are made to or received from unrelated third parties or shell companies without supporting documentation. |
| Circular or “round-robin” transactions | Funds move through a series of accounts/entities and return to the originator without apparent economic gain. |
| Use of unconnected intermediaries | Transactions are executed by intermediaries who have little or no connection to the client’s business. |
Such patterns may be attempts to obscure beneficial ownership or the true source and destination of funds. Therefore, accountants should carefully assess the legitimacy of these arrangements and verify the identity and authority of all parties involved.
Inconsistent or Vague Financial Documentation
Bookkeeping anomalies can signal attempts to conceal illicit activities. Accountants should watch for:
| Red Flag | Potential Indication / Why It’s a Concern |
| Vague invoice descriptions | Invoices use generic descriptions like “consulting fees” without detailed supporting documents. |
| Unexplained reconciliation issues | There are unexplained discrepancies between accounting records and bank statements. |
| Unjustified write-offs or loans | There are unusual intercompany loans without formal agreements or unjustified write-offs of assets. |
| Frequent amendments or late filings | The client frequently amends or files financial statements or tax returns late, especially after scrutiny. |
| Aborted transactions with refunds | A transaction is initiated, but after funds are received, it is aborted with a request for a refund to a third party. |
These inconsistencies may indicate manipulation of financial records, tax evasion, or efforts to obscure the audit trail. Therefore, proper documentation and clear commercial rationale must be insisted upon to mitigate these risks.
Use of High-Risk Payment Methods
Certain payment methods carry higher risks of facilitating money laundering or terrorism financing. Accountants should be alert to transactions involving:
| Red Flag | Potential Indication / Why It’s a Concern |
| Use of cryptocurrencies / virtual assets | The client uses virtual assets, especially with anonymising services like mixers, without clear business justification. |
| Use of bearer instruments or precious metals | The client transacts using methods that can be transferred anonymously and are difficult to trace. |
| Unusual cash payments | Large cash payments or deposits are made that are inconsistent with the client’s declared business model. |
| Use of alternative remittance systems | The client uses money services businesses (MSBs) for transactions that could be done through regulated banks. |
For instance, a client engaging in cryptocurrency transactions without a legitimate business reason or using cash extensively in non-cash businesses should trigger enhanced scrutiny and verification of source of funds.
Get Your Free Initial Consultation
Request a Free Consultation with one of our experienced AML Lawyers today.
Industry-Specific & High-Risk Scenario Red Flags
Cash-Intensive Businesses
Cash-intensive sectors such as hospitality, retail, and construction present heightened money laundering and terrorism financing risks for accountants. These industries often involve large volumes of cash transactions, which can be exploited to integrate illicit funds into the legitimate economy.
Key red flags to watch for include:
| Red Flag | Potential Indication / Why It’s a Concern |
| Large or frequent cash deposits | Deposits do not align with the declared business activity, suggesting placement of illicit cash. |
| Structuring of cash deposits | Cash deposits are structured just below the A$10,000 reporting threshold to evade TTRs. |
| Discrepancies in cash sales | There are significant discrepancies between reported cash sales and actual bank deposits. |
| Cash used for high-value assets | The business uses cash to purchase assets inconsistent with its profile, signalling layering or integration. |
| Lack of proper cash records | There is an attempt to obscure cash flow, which hinders audit trails. |
| Sudden changes in business model | The business model changes to accommodate more cash, possibly indicating a front for money laundering. |
| Commingling of funds | Personal bank accounts are used for business cash deposits (or vice versa), obscuring the source of income. |
Accountants should apply EDD and closely monitor cash flows in these sectors to detect unusual patterns and ensure compliance.
Politically Exposed Persons & Associated Risks
Clients who are PEPs, or closely associated with PEPs, carry a higher inherent risk of involvement in corruption, bribery, or misuse of public funds. Accountants must exercise heightened vigilance when dealing with such clients.
Important considerations include:
| Red Flag | Potential Indication / Why It’s a Concern |
| Unclear source of funds/wealth | The PEP’s funds appear linked to their official position or are otherwise inconsistent with their profile. |
| Use of associates or vehicles | The PEP uses family members, associates, trusts, or shell companies to hold assets or conduct transactions. |
| Complex, unjustified structures | The PEP uses complex ownership structures that lack a legitimate economic or business purpose. |
| Transactions with high-risk PEPs | The PEP is from a jurisdiction known for high corruption or weak AML/CTF controls. |
| Unexplained large payments | The PEP or their associates receive sudden influxes of wealth, which may indicate illicit origins. |
| Use of professional facilitators | The PEP uses professionals to lend legitimacy to questionable transactions or structures. |
| Reluctance to provide documentation | The PEP client is unable or unwilling to provide credible explanations for their source of wealth or funds. |
EDD measures, including thorough PEP screening, source of funds verification, and ongoing monitoring, are essential to mitigate these risks.
Sanctioned & High-Risk Jurisdictions
Dealing with clients, beneficial owners, or counterparties connected to sanctioned countries, tax havens, or jurisdictions with weak AML/CTF frameworks significantly increases exposure to money laundering and terrorism financing risks.
Key red flags include:
| Red Flag | Potential Indication / Why It’s a Concern |
| Transactions with sanctioned entities | Transactions involve entities/individuals in jurisdictions subject to sanctions or identified as high-risk by FATF. |
| Use of offshore secrecy jurisdictions | Shell companies or trusts are registered in offshore secrecy jurisdictions without a clear business rationale. |
| Funds flow to/from unconnected countries | Funds are moved to or from countries where the client has no apparent business or personal connection. |
| Transactions routed through multiple jurisdictions | The payment trail is unnecessarily complicated by routing through multiple countries without commercial justification. |
| Preference for high-risk jurisdictions | The client routes transactions through high-risk jurisdictions even when more direct routes exist. |
| Business with newly sanctioned jurisdictions | Sudden business relationships are established with entities in jurisdictions that have recently been sanctioned. |
Accountants must implement rigorous sanctions screening, EDD, and ongoing monitoring to detect and manage these risks effectively.
Emerging Risks: Virtual Assets & New Technologies
The increasing use of virtual assets such as cryptocurrencies introduces new challenges in AML/CTF compliance due to their anonymity, rapid transfer capabilities, and potential use of anonymising services.
Red flags in this area include:
| Red Flag | Potential Indication / Why It’s a Concern |
| Extensive crypto use without reason | The client deals extensively in cryptocurrencies without a legitimate business purpose. |
| Use of anonymising services | The client uses mixers, tumblers, or other services that obscure transaction trails. |
| Inconsistent virtual asset transactions | Transactions involving virtual assets are inconsistent with the client’s declared business or financial profile. |
| Use of unregulated remittance systems | The client requests processing transactions through unregulated systems instead of traditional banks. |
| Lack of transparency or documentation | There is a lack of documentation to support virtual asset transactions, hindering source of funds verification. |
Accountants should seek specialised advice on virtual asset risks, apply EDD, and utilise technology solutions capable of monitoring and flagging suspicious virtual asset activities to ensure compliance.
Get Your Free Initial Consultation
Request a Free Consultation with one of our experienced AML Lawyers today.
Document & Source of Funds/Wealth Red Flags
Forged or Altered Documents & Inconsistencies
Accountants must be vigilant for red flags related to client documentation during verification processes, as these can be crucial indicators of potential money laundering or terrorism financing.
Several document-related warning signs that should raise immediate concerns include:
| Red Flag | Potential Indication / Why It’s a Concern |
| Forged, altered, or poor-quality ID | May indicate an attempt at identity fraud. |
| Inconsistencies across documents | Information on different documents (e.g., name, address) does not match. |
| Mismatched or doctored financials | Financial documents seem altered or do not logically support the client’s declared wealth. |
| Foreign documents without translation | Hinders proper verification. |
| “Too perfect” documentation | May suggest professional falsification and deliberate deception. |
| Reluctance to provide original documents | The client prefers to provide copies, which hinders thorough verification. |
| Unusual or unverifiable sources | Documents originate from sources that cannot be verified. |
For instance, if a client provides financial statements that are outdated or cannot be reconciled with other information, this could be an attempt to obscure their true financial position or the illicit origin of funds.
Unverifiable or Implausible Source of Funds or Wealth
A critical aspect of CDD for an accountant is the verification of a client’s source of funds (SoF) and source of wealth (SoW). Red flags emerge when a client is reluctant, evasive, or unable to provide clear, credible, and verifiable documentation to support their stated SoF or SoW.
The stated SoF or SoW should be consistent with the client’s known profile, including their age, occupation, business activities, and lifestyle. Significant inconsistencies, such as unexplained wealth or funds derived from undisclosed activities, constitute major red flags.
For example, a client claiming a sudden large influx of funds from an inheritance or lottery win but failing to provide credible supporting evidence should trigger EDD. Similarly, the inability to provide a clear audit trail for wealth accumulation may point to obscured origins or proceeds of crime.
Additional situations that warrant caution include:
| Red Flag | Potential Indication / Why It’s a Concern |
| Evasion on SoF/SoW | Client is reluctant or unable to provide clear, credible, and verifiable documentation for their funds/wealth. |
| Funds from unexplained third parties | Funds originate from unrelated parties, especially from high-risk jurisdictions or opaque structures. |
| Over-reliance on cash | Cash is used for significant transactions where electronic transfers would be more appropriate. |
| Vague details about wealth generation | Unverifiable details about employment, business, or investments supposedly generating the wealth. |
| Discrepancies in property values | The declared value of a property used as a source of funds is questionable. |
| Convenient or recent “paper trail” | The documentation supporting the source of funds appears recently created or lacks historical depth. |
Complex Loan Arrangements & Financial Structures
Complex loan arrangements and financial structures can be used to disguise illicit funds. Accountants need to identify several red flags associated with these practices.
Unusual loan agreements that lack commercial terms, such as those from private or offshore lenders without clear repayment schedules or interest rates, should be carefully scrutinised. These may be attempts to introduce illicitly obtained money into the financial system under the guise of legitimate borrowing.
The use of fabricated paper trails designed to disguise illicit funds is another significant concern. This could involve creating documents for loans that never actually occurred or for transactions that have no economic substance. For instance, intercompany loans within a complex group structure that lack proper documentation or clear commercial rationale potentially indicate an attempt to layer or move illicit funds.
Other suspicious indicators in this area include:
| Red Flag | Potential Indication / Why It’s a Concern |
| Unusual loan agreements | Loans lack commercial terms (e.g., no interest, no repayment schedule) or are from unusual private/offshore lenders. |
| Fabricated paper trails | Documents are created for loans that never occurred or for transactions that have no economic substance. |
| Loans with unusually favourable terms | Loans from unrelated parties have terms that are not commercially viable. |
| Loans repaid almost immediately | The source of the repayment funds is unclear, suggesting a “loan back” scheme. |
| Use of shell companies in loan structures | Shell companies or entities in secrecy jurisdictions are used as part of the loan arrangement. |
| Circular loan arrangements | Funds move between entities without any discernible economic purpose. |
Accounting Software & IT System AML/CTF Risks
Disabled or Tampered Audit Logs & Controls
Disabled or tampered audit logs within accounting software pose significant risks to AML/CTF compliance. When transaction histories or system-generated journal entries are frequently cleared, disabled, or manually overridden without proper authorisation or documentation, it becomes difficult to trace user actions or reconstruct financial activity. This lack of traceability can conceal illicit transactions and obstruct investigations.
For example, if an accountant or client tampers with audit logs to hide unusual fund movements, the firm’s ability to detect money laundering or terrorism financing activities is severely compromised. Therefore, maintaining intact and regularly reviewed audit logs is essential to ensure transparency and accountability in financial records.
Unauthorised Access & Poor User Permission Management
Excessive or poorly managed user permissions in accounting and IT systems create vulnerabilities that can facilitate money laundering or terrorism financing. When multiple users share login credentials or when access rights are not appropriately restricted, unauthorised individuals may manipulate, delete, or alter sensitive financial data without detection. Such weaknesses increase the risk of internal fraud and the concealment of suspicious activities.
For instance, if a user without proper clearance can override controls or modify transaction records, it undermines the integrity of the AML/CTF compliance program. To mitigate these risks, it is critical to implement strict access controls, enforce the principle of least privilege, and regularly review user permissions.
Use of Outdated or Insecure Software
Using outdated, unsupported, or insecure accounting software exposes firms to cybersecurity threats and compliance failures. Software lacking current security patches or audit capabilities may be vulnerable to cyber-attacks, data breaches, or system failures that disrupt AML/CTF monitoring processes.
Resistance to adopting compliant and modern systems can leave firms ill-equipped to detect suspicious transactions or maintain accurate records. For example, legacy software without integrated transaction monitoring alerts may fail to flag unusual payment patterns indicative of money laundering. Consequently, upgrading to secure, supported software with robust AML/CTF features is vital for effective risk management.
Data Security & Record-Keeping Deficiencies
Deficiencies in data security and record-keeping practices increase the risk of data loss, unauthorised access, and non-compliance with AML/CTF obligations. Storing sensitive client and transaction data without encryption, inadequate backup protocols, or on unsecured devices compromises confidentiality and the integrity of records.
Additionally, reluctance from clients or staff to provide data in auditable formats or to allow direct system access hinders effective monitoring and reporting. For instance, failure to maintain secure and retrievable records for the required seven-year retention period can result in regulatory penalties.
To safeguard information and support compliance efforts, establishing strong data protection measures is essential. These measures include encryption, regular backups, and secure access controls.
Get Your Free Initial Consultation
Request a Free Consultation with one of our experienced AML Lawyers today.
Reporting Obligations & Continuous Monitoring
Suspicious Matter Reports & Threshold Transaction Reports
A critical function for Australian accountants under the AML/CTF regime is the timely and accurate reporting of specific transactions and any suspicious activities to AUSTRAC. These reports are vital for AUSTRAC’s financial intelligence capabilities and assist law enforcement agencies.
Accountants must submit an SMR to AUSTRAC if they form a suspicion on “reasonable grounds” that a current or prospective client, or a transaction, is connected to money laundering, terrorism financing, proceeds of crime, tax evasion, or any other serious criminal offence. A suspicion is formed on reasonable grounds when a diligent professional would conclude a matter is suspicious after considering all circumstances and conducting appropriate EDD.
SMRs must be submitted electronically via the AUSTRAC Online portal. The deadlines for submission are:
| Condition for SMR Submission | Reporting Deadline |
|---|---|
| Suspicion relates to terrorism financing. | Within 24 hours. |
| Suspicion relates to money laundering or any other offence. | Within 3 business days. |
Accountants must also submit a TTR to AUSTRAC for any transaction they conduct on behalf of a client involving the transfer of physical currency (cash) of A$10,000 or more, or its foreign currency equivalent. TTRs must be submitted to AUSTRAC within 10 business days after the transaction date via AUSTRAC Online.
While individual cash transactions of A$10,000 or more require a TTR, if there’s suspicion of “structuring” – deliberately splitting larger sums into smaller amounts to avoid the threshold – an SMR must be filed. It is crucial to note the strict legal prohibitions against “tipping off,” meaning disclosing to the client or any unauthorised third party, that an SMR has been submitted.
Indicators for Enhanced Due Diligence & File Reviews
Ongoing Customer Due Diligence (OCDD) is a fundamental obligation, requiring accountants to actively monitor client relationships and transactions throughout the engagement. This continuous monitoring aims to detect changes or activities indicating an increased or previously unidentified money laundering or terrorism financing risk.
Key indicators that may warrant a more detailed file review, EDD, or SMR reporting include:
| Red Flag | Potential Indication / Why It’s a Concern |
| Sudden or unexplained changes in transaction patterns | Significant deviations in transaction volume, value, frequency, or geographic destination compared to the client’s established history. |
| New, unexplained high-value invoices or payments | The appearance of unusually large invoices or payments inconsistent with the client’s normal business or financial capacity. |
| Unexplained related-party transactions | New or significantly altered transactions with related parties that lack a clear commercial rationale or proper documentation. |
| Significant changes in client’s business or structure | Material changes to the client’s business activities, ownership, or control, which could alter their risk profile. |
| Adverse media or law enforcement inquiries | The client, their owners, or controllers become the subject of credible adverse media or law enforcement inquiries. |
| Change in PEP status | A client or beneficial owner becomes a Politically Exposed Person (PEP), or their existing PEP status changes in a way that elevates risk. |
| Requests for unnecessarily complex transactions | The client requests transactions that seem designed to obscure the true nature or ownership of funds or lack a lawful purpose. |
Balancing Compliance, Confidentiality, & Legal Privilege
A significant challenge for accountants lies in fulfilling their reporting obligations, particularly for SMRs, while maintaining client trust and navigating obligations of confidentiality. This includes considerations of legal professional privilege (LPP) where applicable, especially for services that might overlap with legal advice.
Deciding to report on a client, especially a long-standing one, can be an ethically and operationally difficult decision. The apprehension of damaging client trust can create internal conflict. AUSTRAC is working to clarify the application of LPP within the AML/CTF framework, but potential grey areas may persist.
Firms must establish apparent internal protocols for escalating concerns and deciding on SMRs, likely involving the AML/CTF Compliance Officer and senior management. Documenting the rationale for all decisions—whether to report or not—is paramount for demonstrating sound professional judgment and compliance. AUSTRAC provides a dedicated form for privileged documents when reporting is necessary.
Get Your Free Initial Consultation
Request a Free Consultation with one of our experienced AML Lawyers today.
Conclusion
Australian accountants must navigate heightened AML/CTF obligations, particularly with the impending Tranche 2 reforms, making proactive identification and management of money laundering and terrorism financing risks paramount. This guide has delivered a comprehensive checklist covering critical AML/CTF red flags across client onboarding, transactions, industry-specific scenarios, and systems, empowering accounting professionals to achieve robust compliance and protect both their firms and Australia’s financial system.
To navigate these complex AML/CTF obligations and ensure your firm is fully prepared, contact AML House today for specialised legal and consulting services. Our experts offer trusted expertise to help your accounting practice transform these regulatory challenges into strategic opportunities, ensuring peace of mind and robust compliance.
