Reporting entities and their staff have long grappled with the broad prohibitions on tipping off found in section 123 of the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth) (AML/CTF Act).
Problems can arise, for example, when a reporting entity decides that it does not wish to continue a relationship with a customer because of unusual transactions or behaviour. Under the law as current at the time of writing this update, where there are unusual transactions or behaviour in a customer's dealings, a reporting entity must conduct an enhanced customer due diligence as provided for by Chapter 15 of the Anti-Money Laundering and Counter Terrorism Financing Rules Instrument 2007 (No.1) (AML/CTF Rules). Ultimately, as part of its enhanced customer due diligence processes the reporting entity is obliged to consider whether to continue a relationship with a customer rather than allowing transactions to continue: see Rule 15.10(6) of the AML/CTF Rules.
The existing tipping off prohibition has also often proved to be an obstacle to appropriate sharing of information (such as suspicious matter reports) with third parties such as consultants and contractors who have wanted access to the information to perform look back reviews, remediations and even independent reviews.
Replacement of section 123
Section 123 will soon be replaced by a materially different prohibition which is inserted by paragraph 2 of Schedule 5 to the Anti-Money Laundering and Counter Terrorism Financing Amendment Act 2024 (Amendment Act). Although most changes made by the Amendment Act will commence on 31 March 2026, this new section 123 will take effect on 31 March 2025.
Scope of current prohibitions
At present section 123 of the AML/CTF Act makes it a criminal offence (among other things) to disclose information from which it could be inferred that a reporting entity has lodged a suspicious matter report with AUSTRAC concerning a person. There is a similar prohibition of disclosures from which it could be inferred that the reporting entity had been required to provide information or to produce a document to AUSTRAC or a specified law enforcement authority.
These prohibitions are subject to a narrow set of exceptions such as disclosure within designated business groups, to another reporting entity in a corporate group, and to legal advisors for the purposes of seeking advice. The prohibition can create particular difficulties for a reporting entity which engages in communications with a customer, their advisers and third parties (including courts) concerning the reasons for electing to discontinue a relationship with the customer. In some circumstances the prohibitions can also obstruct the sharing of information about fraud and scams with other reporting entities that are not part of the same corporate group.
"No prejudice" concept (under the new prohibition)
In future, there will be a prohibition on disclosure of information where this would or could reasonably be expected to prejudice an investigation:
a) of an offence; or
b) for the purposes of legislation concerning dealings with the proceeds of crime.
This should enable a range of disclosures for proper purposes which are not presently possible. We are aware that reporting entities are therefore reviewing their policies and protocols concerning disclosures from which it might be inferred that a suspicious matter report, or other requested information, has been provided to AUSTRAC or to an applicable law enforcement agency. We expect that this revised prohibition can reduce the number of practical problems which currently arise under section 123.
If you are considering changes to your policies and protocols for managing disclosures, we would be happy to assist.