You have filed a suspicious matter report (SMR), your report to AUSTRAC that a transaction or activity may involve money laundering, terrorism financing or another serious crime. From that moment you are barred from telling the client the report exists: Section 123 of the AML/CTF Act 2006 (Cth) makes it an offence to disclose anything that would, or could reasonably be expected to, prejudice an investigation. The maximum penalty is two years imprisonment, 120 penalty units, or both, and it does not matter whether an investigation has actually started.
Tipping off is the name for a disclosure of that kind. The current form of s123 is new. The AML/CTF Amendment Act 2024 rewrote the offence, and the current text has been in force since 31 March 2025. The old rule prohibited disclosing anything from which an SMR could be inferred, which made the report’s existence effectively secret. The new rule asks whether the disclosure would, or could reasonably be expected to, prejudice an investigation. That is a different question, and it is the whole of the test.
Prejudice carries its ordinary meaning: set back, hinder or compromise. Alerting the subject of a report can let them move funds, destroy documents or warn associates before AUSTRAC acts. That is the harm the offence exists to prevent. The test is objective: it looks at the effect a reasonable person would expect, not at your intention. A disclosure made in good faith is still a disclosure if it could reasonably prejudice an investigation.
The harm-based test
Section 123 works in pieces. First, what counts as a disclosure: any communication of information about the report, including to a colleague, to the client, or to someone connected with the client. Second, the standard: the disclosure would, or could reasonably be expected to, prejudice an investigation. Third, the baseline: no investigation needs to have started. AUSTRAC may still be assessing the matter, and the exposure is the same.
| Scenario | What s123 allows or prohibits | Consequence |
|---|---|---|
| You disclose something to the client or a third party that would, or could reasonably be expected to, prejudice an investigation | Prohibited | Offence: up to two years imprisonment, 120 penalty units, or both (s123) |
| The disclosure could not reasonably be expected to prejudice an investigation | Allowed | No offence; record your reasoning so the decision is reviewable |
| You disclose before any investigation has started | Still prohibited | The offence does not require an investigation to have started (s123) |
The prohibition is not limited to whoever filed the report: in practice it attaches to everyone in the firm who can see the report trail, because a disclosure by any of them can prejudice the investigation. The report itself runs on a separate clock: three business days from when the suspicion forms (s41(2)), with other windows for specific cases. The suspicious matter reports page works through them. This page covers what you may say after the report is filed.
You cannot reason that because no investigation has started, nothing can be prejudiced. The test does not require one. A matter AUSTRAC is still assessing, or has not yet looked at, carries the same exposure as one under active inquiry. The exposure does not wait for AUSTRAC to act, and a slow regulator is not a signal that nothing is at risk. Apply the test before you speak: work out what the listener already knows, what your words would add, and what they could do with it. If a reasonable person would expect the addition to let the subject act before AUSTRAC, the disclosure is prohibited. Record that assessment when you make it: it is what AUSTRAC will apply to the conversation later.
Two situations test the boundary most often. A client who asks directly whether you have reported them: the question does not change the test, and a truthful yes is a prohibited disclosure if it could prejudice the investigation. A client who asks what is happening after a delay: you can give the honest business answer about the delay without naming a report or an investigation. The difference between the two answers is the difference the test draws.
Tipping-off exposure belongs in the AML/CTF program, not in a one-off reminder. The program should say who sees reports, who may discuss them, and what the exit script is. Where the program is silent, the default is that anyone with system access can see the report trail, and that default is the exposure.
The prohibition is specific, and it does not mean you stop communicating with clients. Work on an unrelated matter proceeds normally. Updates that carry no information about a report or an investigation are not disclosures of that kind. Ordinary client contact and the report trail run through the same people, which is why the firm needs a rule about who may discuss reports at all. In most practices the decision to speak or stay silent sits with the AML/CTF compliance officer (the AMLCO) or the partner responsible for the report, not with whoever answers the phone. A front-desk reply that references the report is as much a disclosure as one from the partner.
Privilege sits alongside this. You can be entitled to withhold privileged material from AUSTRAC and still be prohibited from telling the client the report exists. The privilege assessment must not itself become a disclosure, so the record of that assessment needs the same access controls as the SMR it relates to. The legal professional privilege page works through the three filing paths and how they interact with s123.
What catches people out
Three patterns cause the most trouble in the first year.
The harm-based test is a different test, and the stakes are unchanged. Read it as permission to talk and you miss that many of the same statements are still caught: telling a client about a report is usually the exact disclosure that would let them act on it. The consequence is an offence you did not expect, from a conversation you thought was safe.
Internal systems tip off without anyone meaning to. A case management flag that shows an SMR exists, a file note that names the report, an audit trail a partner can scroll: each becomes a disclosure when someone with access repeats it to the client. The flag exists to help staff work the matter, which is exactly what makes it dangerous: the same tool that supports the case advertises the report to everyone who opens the file. The consequence is that the firm’s own tools create the exposure, and the records AUSTRAC can review show it.
Declining to act can signal the report. Refusing a new matter, or exiting one, shortly after filing can communicate that a report exists, especially to a client who is already suspicious. The consequence is that a business decision becomes the disclosure. A neutral, standard explanation that gives no reason connected to the report keeps the decision separate from the report. Use it the same way every time, so no single refusal stands out.
What is still unsettled
The current form of s123 has been in force since 31 March 2025 and, as at the time of writing, it is untested. No body of published decisions yet shows how the courts will apply “could reasonably be expected to prejudice” to the situations firms actually hit: the casual mention, the refusal, the internal comment. How AUSTRAC will apply the test in practice is also still settling. Until either moves, the conservative reading is the working one: if a reasonable observer could see the disclosure harming an investigation, treat it as prohibited. Watch for AUSTRAC guidance and for the first prosecutions of the new offence; both will shape how firms draft their procedures. Review this position when either moves.
Where to start
Three things move you from exposed to controlled:
- A named list of who may discuss a report: write down the people allowed to talk about a report and its grounds, and give everyone else a standing instruction to neither ask about nor mention reports.
- Access controls on the report trail: restrict flags, file notes and records that reference an SMR to that same list, so the systems do not advertise the report to everyone who opens the file.
- A neutral script for declining work: settle on a standard explanation for refusing or exiting a matter that carries no reason connected to a report, and record the business reason separately.
How duely handles this
This is the control duely is built around rather than a feature bolted on. SMR data sits in a shadow case, isolated from the matter it relates to across seven architectural layers, so an SMR does not surface on shared dashboards, lists, exports or notifications for anyone without the AMLCO role. Staff escalate through a redacted unusual activity report, which is what lets someone raise a concern without learning whether a report exists. The isolation is enforced in the data layer, not by hiding a button.