Tipping Off
AUSTRAC published a revised guideline that provides clarifications on ‘tipping off’, as amended by new Section 123 of the Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF Act).
Tipping off is a criminal offence. The maximum penalty for tipping off is imprisonment for 2 years or 120 penalty units, or both. The new tipping off offence will enter into force on 31 March 2025 for all existing reporting entities (and it will apply to all new reporting entities next year).
What
It is a criminal offence to disclose certain types of information to another person, where it would, or could, reasonably be expected to prejudice an investigation. Whether you know (or think) an investigation has started or you don’t.
Prejudicing an investigation means doing something that could negatively affect an investigation. Some examples are:
telling a customer that you have provided a suspicious matter report (SMR)
telling a customer that you suspect they are using your services to engage in criminal conduct
accidentally disclosing Information publicly (e.g., via the media)
If the suspected person becomes aware of an SMR, this may prompt them to change their behaviour to avoid detection by law enforcement and make investigations more difficult.
Who
The tipping-off offence applies to a reporting entity, an employee or agent of a reporting entity, a member of a reporting group, an employee or agent of a member of a reporting group and a person required by notice to provide information. Moreover, it applies to a person who “is or has been” engaged in any of those capacities. This captures a person who has ceased employment with the relevant entity and makes the prohibition of disclosure of relevant AML/CTF information enduring.
The tipping off offence applies whether you create, share or receive the relevant information.
Policies, procedures and controls
Your policies, procedures and controls to prevent tipping off should be sustainable for your business. A good starting point is enhancing the policies and procedures that you already have in place. Some examples are:
restrict access to information to those with a genuine need to know
de-identify any Information that is distributed more widely across your business when discussing trends and insights
implement and review audit trails of who accesses information
Most importantly, you must conduct due diligence on your employees to determine their suitability for AML/CTF roles in your business and provide them with appropriate training to ensure they understand the tipping-off offence.
Managing customers
Issues may arise when you need to ask the customer for enhanced customer due diligence (enhanced CDD) or when terminating a relationship with a customer. AUSTRAC recommends that you provide the customer with a reasonable business reason for asking for further enhanced CDD information or for terminating the business relationship, without mentioning your suspicions. For example, AUSTRAC suggests explaining that:
you need to comply with AML/CTF legislation
you need to make sure you have the most up-to-date customer details on file
you need to collect additional information as part of your company’s standard processes
the general nature of the customer’s activities falls outside your business’s risk appetite
the customer has failed to respond to your requests to provide further details within a reasonable timeframe
To facilitate such communications, you should provide your staff with adequate training and could adopt standardised forms or scripts. If possible, difficult conversations should be escalated to senior managers. You should also document your interactions with the customers and any steps you took to reduce the risk of tipping off.
What is likely NOT tipping off
You are not prohibited from disclosing Information to third parties under the new tipping off offence if it would not, or could not, reasonably be expected to prejudice an investigation. For example:
Disclosures to staff or senior management in your business, a reporting entity in your designated business group or corporate group or external service providers in relation to the SMR.
Disclosures while in the process of supporting due diligence in a merger or acquisition involving your business to meet your AML/CTF obligations or manage ML/TF risks.
Disclosures to consultants supporting you with AML/CTF remediation and uplift, or to your lawyer to seek legal advice on your AML/CTF obligations.
Disclosures to help a victim of a scam to resolve the issue or to recover their losses.
If you are a legal practitioner or a qualified accountant, disclosures to your customer, in good faith, to dissuade them from activities that could be a legal offence.
What’s next
Any questions about the new amendments to the AML/CTF Act? Get in touch for a free chat and let’s see if I can help.
