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How to recognise money laundering and terrorism financing red flags in a professional services context, your obligation to report suspicious matters to AUSTRAC, and the strict tipping-off prohibition.
25 min · 4 sections · 1 knowledge check
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Section 01
What Is a Red Flag?
A red flag is a factor, behaviour, transaction pattern, or circumstance that — individually or in combination — may indicate that a client or matter involves money laundering or terrorism financing. Red flags do not confirm criminal activity — they indicate that further scrutiny is warranted and may trigger your obligation to report.
AUSTRAC publishes sector-specific red flag guidance for professional services firms. The indicators below are drawn from AUSTRAC's guidance for lawyers, accountants, conveyancers, and real estate agents.
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Identity concerns
Client reluctant to provide ID; ID appears inconsistent or altered; client uses multiple names or addresses; beneficial ownership unclear despite inquiry.
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Unusual source of funds
Client unable to explain the source of funds; funds come from unexpected or unrelated third parties; large cash payments or cryptocurrency used without explanation.
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Transaction inconsistency
Transaction appears inconsistent with client's known business or financial profile; property purchased significantly above or below market value; frequent or unexplained changes to transaction structure.
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Jurisdiction concerns
Funds from or transactions connected to high-risk jurisdictions; unnecessary use of offshore entities or accounts; client insists on using a foreign lawyer or accountant without clear reason.
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Urgency and pressure
Client applies unusual pressure to complete a transaction quickly; client asks you to skip or shortcut CDD procedures; client becomes evasive or hostile when asked standard questions.
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Unusual instructions
Instructions to send funds to unexpected third parties; client asks for unusual confidentiality; instructions change frequently without explanation; client appears not to understand the transaction they are requesting.
Section 02
Red Flags Specific to Professional Services
Beyond the general indicators above, AUSTRAC has identified specific red flags for each professional services sector.
For lawyers and law firms:
Client asks the firm to receive and hold funds without a clear legitimate purpose for the funds sitting in trust
Client asks you to establish multiple corporate or trust structures without apparent commercial purpose
Funds received into trust are quickly moved to an unrelated third party account
Client instructs you to purchase property in cash without explanation
Transaction involves a PEP or a client connected to a high-profile enforcement matter
For accountants:
Client asks you to prepare financial statements with backdated information or inconsistent with other known facts
Client seeks advice on moving assets between jurisdictions in a way that obscures ownership
Business accounts show large cash transactions inconsistent with the business type
Client's stated turnover or profit is inconsistent with their lifestyle or assets
For conveyancers and real estate agents:
Property purchased significantly above asking price without clear commercial rationale
Funds come from multiple sources or third parties not connected to the transaction
Property is quickly sold after purchase without apparent commercial reason
Purchaser has no apparent connection to the location or use of the property
Section 03
Suspicious Matter Reporting — Your Obligation
A Suspicious Matter Report (SMR) must be submitted to AUSTRAC when you suspect on reasonable grounds that a matter, transaction, or client involves ML/TF. The obligation to report applies to you personally — not just to your firm.
The test is subjective and low-threshold: you do not need to be certain, and you do not need to have evidence of an actual crime. A reasonable suspicion formed on the basis of observed red flags is sufficient.
Reporting Timeframe
SMRs must be submitted to AUSTRAC within 24 hours of forming a suspicion in relation to terrorism financing matters, and within 3 business days for all other suspicious matters. Do not delay reporting while waiting for certainty — report as soon as suspicion is formed and let AUSTRAC assess the information.
The SMR process at your firm is:
If you observe red flags or form a suspicion, do not confront the client — you have a strict obligation not to tip off a person that a report is being or may be made
Report your concerns immediately to your AML/CTF Compliance Officer using the internal escalation procedure in your firm's AML/CTF programme
Your Compliance Officer will assess the matter and submit an SMR to AUSTRAC via the AUSTRAC Online portal if warranted
Maintain a record of your observations and the steps taken, including dates and times
Tipping Off — A Criminal Offence
It is a criminal offence under the AML/CTF Act to disclose to a client, or to any other person, that a suspicious matter report has been or may be made, or to disclose information that might prejudice an AUSTRAC investigation. Do not tell the client, do not discuss the matter with colleagues who are not involved, and do not document your suspicion in a file note that the client could access.
Section 04
What Happens After a Report Is Made
Once an SMR is submitted to AUSTRAC, your firm's obligations shift. You continue the normal client relationship unless instructed otherwise — abruptly terminating a relationship can itself constitute tipping off if the client infers that a report has been made. Your Compliance Officer will manage all ongoing communication with AUSTRAC.
AUSTRAC may share SMR information with the Australian Federal Police, state and territory police forces, the ATO, ASIC, and other agencies. In some cases, AUSTRAC may issue a production order requiring your firm to provide further information. Compliance with such orders is mandatory.
You are protected from civil, criminal, and administrative liability for making a report in good faith — even if the suspicion ultimately proves unfounded. The law is designed to encourage reporting without fear of consequences for honest compliance.
Knowledge Check — Module 03
A long-standing client asks your firm to receive A$2 million into trust from a third party you have never dealt with, to be held pending a property transaction. The client becomes evasive when you ask about the source of funds. What is the correct course of action?
✓ Section Complete — Well Done
You've completed the Red Flags and Suspicious Matter Reporting module. Inside Proximo Comply, every staff member's SMR training completion is stored in the AUSTRAC audit report. Continue to the final preview module, or get platform access now.