Understanding the New Tipping Off Regime in Australia

The tipping off mandate has been updated in Australia as a part of a series of reforms to the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act 2006. These reforms are set to apply from 31st March 2025. In this article, we discuss the new and updated definition of tipping off in Australia, its essentials, and guidance for reporting entities on how to reduce the risk of breach of the tipping off offence.

Reformed Definition of Tipping Off for AML/CTF Compliance in Australia

If a person discloses a certain kind of information to another person, where such information would/could reasonably be expected to prejudice an investigation, then such an act of disclosure amounts to an offence of Tipping Off under the new reforms to the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act 2006.

Insights into the Need for Tipping Off Offence

The offence of tipping off prevents reporting entities from disclosing any kind of information that can lead criminals to hide or change their illegal activities. Tipping off also protects the privacy and reputation of the customer, who may be a victim of the suspected criminal activity, as mere suspicion is not conclusive evidence that the customer is involved in any financial crimes.

The provision of tipping off offence also protects the identity of the person submitting a Suspicious Matter Report (SMR) to AUSTRAC by maintaining high standards of confidentiality.

Now, let us understand the essentials of the new tipping off offence.

Essentials of the New Tipping Off Offence

The amended AML/CTF Act, 2006 provides the essential elements of tipping off offences in Australia, which include:

If the person discloses information to another person who is not entrusted by AUSTRAC
If the person making the disclosure is or has been either a reporting entity/ any officer/employee/agent of a reporting entity/ a person required to share further information or documents specified in a notice by AUSTRAC CEO/Commissioner of the Australian Federal Police/CEO of Australian Crime Commission/Commissioner of Taxation/Comptroller-General of Customs/National Anti-Corruption Commissioner/Investigation Officer concerning the reports filed by the reporting entity under the AML/CTF ACT, 2006 or the repealed Financial Transaction Reports Act 1988, or information/document that may assist AUSTRAC CEO in performing their functions.
If the information disclosed includes:

- Information that can establish that the reporting entity submitted an SMR or that their reporting obligations are triggered.
- Information about the report made or prepared for the purpose of meeting SMR obligations
- Copies of the SMR or any document purporting to set out SMR information, like formation or existence of a suspicion.
- Information about any notice sent by the AUSTRAC CEO for obtaining information or documents in certain circumstances or for seeking further information and whether the person is required to give information or produce a document in response to the notice.
- For Cash Dealers prior to 7 January 2025, Information about Suspect Transaction Report (SUSTR) under the repealed Financial Transaction Reports Act 1988, including specifications about the suspicion formed concerning a transaction, whether such information was submitted to AUSTRAC CEO through SUSTR or as a response to the relevant notice and any information from which anyone could reasonably deduce that such information concerning suspicion was given to AUSTRAC

If the disclosure would or could reasonably be expected to prejudice an investigation of any offence against a law of the Commonwealth or any State/Territory, or for the purpose of the Proceeds of Crime Act 2002 (POCA) or any regulations thereunder, or any State or Territory laws corresponding to POCA or any regulations thereunder.

Understanding Prejudice to an Investigation as a Requirement for Tipping Off Offence

One of the major requirements for the offence of Tipping Off is that the disclosure of information could or would reasonably be expected to prejudice an investigation. This means that if disclosure of information can reasonably be expected to negatively affect an investigation, then it amounts to tipping off. The risk of prejudicing an investigation may depend on a combination of the following factors:

Content of the Information Disclosed

If the content of the information disclosed includes any protected information covered in the AML/CTF Act, 2006, for instance, if any information relating to the Suspicious Matter Report is revealed or any explicit actions from which the customer can infer that a suspicion has arisen, then it can negatively affect an investigation.

Recipient of the Disclosed Information

Whether a disclosure can prejudice an investigation also depends on the person to whom the disclosure is made. For example, if the disclosure is made to any person entrusted by AUSTRAC, then such disclosure cannot negatively affect an investigation, but say if the disclosure is made to a third party who can potentially share it with the public at large, like a journalist, then that can prejudice an investigation.

Method of Disclosure

For a disclosure to amount to tipping off, it is not necessary for the person disclosing information to know that the disclosure will negatively affect an investigation. For example, if an employee discloses any such information by mistake on a public platform, then it would still amount to tipping off.

Time of Disclosure

Time is everything when combating financial crimes, and therefore, if disclosures are made before or during the period of investigation, then it can give the criminals an opportunity to conceal any trail of evidence, certainly hampering the course of an investigation. However, this does not imply that reporting entities are free to disclose any protected information after reporting it because it may even compromise future investigation efforts, if any. Thus, it is important for compliance professionals to be alert about not unintentionally disclosing information while following their Customer Due Diligence (CDD) obligations.

Therefore, reporting entities must ensure that to avoid any kind of prejudice to an investigation, their protected information should not be publicly released or get back to a person who might be engaged in any criminal activity or to any other person who is associated with the person suspected of criminal activity.

Disclosures that are not Considered as Tipping Off

There are some disclosures that are exempted from being considered as tipping off. At the same time, some disclosures are not likely to be considered as tipping off, as per AUSTRAC:

Disclosures to Prevent Crime

Disclosures relating to information or reports concerning suspicious matters are exempted from being considered as tipping off if:

The person making the disclosure is a reporting entity that is either a legal practitioner/qualified accountant/any partnership or company carrying on a business of providing professional legal services/accountancy services through legal practitioners or qualified accountants, respectively, or any other person specified in the AML/CTF Rules, and
The information is about the affairs of the reporting entity’s customer, and the disclosure is made in good faith to prevent the customer from partaking in any sort of conduct that constitutes or may constitute an offence against the law of the Commonwealth or a State/Territory.
AUSTRAC recommends that such entities focus on how the customers’ activities could result in a breach of the law and the penalties thereof. However, it is recommended that reporting entities do not disclose any information about related STR/SUSTR/relevant notice or obligations of the reporting entity with respect to the STR or notice.

Disclosures for Sharing Information to Identify, Avert or Disrupt Money Laundering, Terrorism Financing, Proliferation Financing (ML, TF, and PF), and Other Serious Crimes

Disclosure of any protected information does not amount to an offence of tipping off if such disclosure is made to another reporting entity for the purpose of identifying, averting, or disrupting ML, TF, PF, and other serious crimes, subject to any regulatory conditions prescribed.

For example, disclosures made between reporting entities engaging in the activities of Fintel Alliance cannot be considered as tipping off.

Disclosures to Comply with Requirements in Commonwealth, State, or Territory Laws

If any disclosures are made pursuant to the laws of the Commonwealth or State/Territory, for instance, there are multiple disclosure requirements under the Scams Prevention Framework that the regulated entities need to follow. In such cases, the disclosures made shall not amount to tipping off.

Disclosures Made for Meeting the Reporting Entity’s AML/CTF Obligations or Mitigating ML/TF Risks to the Business

Any internal disclosures made to the reporting entity’s staff or senior management, or any external disclosures to other reporting entities of the same designated business group for the purpose of managing ML/TF risks to the business, are not considered as tipping off.

Similarly, if a reporting entity appoints any external service providers/ consultants to support them in AML/CTF remediation and enhancement or seeks any legal advice from a lawyer on its AML/CTF obligations, then such communication cannot be considered as tipping off.

Disclosures Made During Corporate Restructuring

According to AUSTRAC, any disclosures made during a merger or acquisition involving the reporting entity to support the due diligence processes will not be considered as tipping off.

Reasonable Questions for Effective Risk-Based Customer Due Diligence

As per AUSTRAC, if a reporting entity’s SMR obligations are not triggered, and the reporting entity or persons engaged by the reporting entity ask reasonable questions to a customer or conduct Enhanced Due Diligence, then such line of questioning cannot be considered as tipping off.

Disclosures to AUSTRAC Entrusted Persons

Disclosure of information to AUSTRAC entrusted persons or Australian law enforcement, intelligence, or regulatory agencies, like the Commonwealth, State/Territory police and agencies having investigative functions, such as the Australian Taxation Office, National Anti-Corruption Commission, Australian Border Force, Australian Criminal Intelligence Commission and alike agencies, does not amount to a breach of the new tipping off offence.

AML Compliance Procedures to Follow to Avoid the Risk of Tipping Off

Businesses that do not deploy adequate controls within their structure are often at a higher risk of tipping off when sharing information within their designated business group or with a third party. Upon implementing the following AML/CTF compliance procedures, reporting entities have a better chance of avoiding the risk of tipping off:

1. Adopting and Maintaining AML/CTF Policies to Prevent Tipping Off

To comply with the new tipping off reforms, AUSTRAC recommends reporting entities to adopt and maintain AML/CTF policies that define proper procedures for identifying the information held by the business, the situations where disclosing such information would or could be reasonably expected to prejudice any investigation and determine measures to implements to prevent the risk of tipping off when disclosing any information or processing any communication.

The AML/CTF policies should also define the legal obligations of third parties to whom any protected information is shared

2. Maintaining Proper Audit Trails

Reporting entities should implement and periodically review audit trails with employee names and timestamps to understand who has access to specific information and during what period of time.

3. Employee Training and Employee Due Diligence

Reporting entities must perform due diligence on their employees to ensure that they do not pose any ML/TF risks and are suited for sharing sensitive information. Additionally, periodic training must be provided to the employees to make sure that they are aware of the risks of breaching the tipping off offence. Role-specific training should be given to customer-facing staff on how to handle sensitive information while balancing customer relationships.

One important thing to keep in mind when training employees is that if any trends or insights are discussed, then reporting entities should be cautious about not mentioning specific customer information or transactions and simply talking about the generally identified patterns.

4. Record-Keeping

It is important for reporting entities to document all the steps taken by the reporting entity. For example, when dealing with a customer in relation to a suspicious activity or information, reporting entities should document their interactions with the customer along with the steps taken by the reporting entity to reduce the risk of breach of the tipping off offence.

Similarly, if at the time of conducting Enhanced Customer Due Diligence (ECDD), the reporting entity is of the opinion that some specific ECDD measures would tip off the customer, then they should not proceed with ECDD and document the reasons for taking this decision.

Moreover, if a person makes any kind of disclosure that is exempted from being an offence, then they should maintain proper records of the disclosure, including the purpose of disclosure, method of disclosure, time of disclosure, etc. This is because, under the AML/CTF Act, 2006, the burden of providing evidence that suggests a reasonable possibility that the disclosure is exempted from the tipping off offence rests with the party seeking exemption.

Thus, by adopting and following proper AML/CTF procedures, reporting entities can reduce the risk of tipping off to a great extent. But let’s take a moment to understand the impact of following AML/CTF obligations on customer relationships and how reporting entities can fulfil their regulatory obligations without tipping off the customer or damaging their reputation.

Balancing Customer Relationships Without Tipping Off

Reporting entities constantly need to balance their need for business growth and the necessity of mitigating the risk of financial crimes. Therefore, while fulfilling their regulatory requirements, it is also important to be aware of its impact on customer relationships. Being seen with a suspicious eye is no pleasant experience for any customer, so here’s how reporting entities can fulfil their regulatory obligations without tipping off and without any friction with the customer:

Seeking Further Information from a Customer without Tipping Off

As discussed before, asking reasonable questions about a customer’s activity cannot in itself be considered as tipping off, but it is necessary for reporting entities to ensure that while seeking additional information, they do not disclose any protected information that could or would reasonably be likely to prejudice an investigation. So to avoid indicating that the reporting entity is suspicious of the customer’s behaviour, AUSTRAC recommends reporting entities to either:

Inform the customer that the information sought is a part of their routine AML/CTF compliance obligations or KYC obligations, or
Tell the customer that the exercise is conducted to ensure that the reporting entity has the most updated details on its record or
Inform them that it is a business policy to collect additional information in certain situations or
Additional verification is required to resolve issues with customer information or identification documents

Terminating a Business Relationship with a Customer without Tipping Off

Where a reporting entity chooses to terminate the business relationship with a customer, then it is advised that they offer genuine reasons for the same which do not indicate that the reporting entity is suspicious of the customer’s behaviour, such as:

Reasons that can establish that there is a commercial basis for ending the relationship or
The reporting entity does not have the funds, additional systems or controls required to manage the regulatory obligations that are related to the customer’s account or
The customer has taken an unreasonably long time to provide the additional information requested by the reporting entity or
The additional information shared by the customer is unsatisfactory or
The nature of the customer’s activities is beyond the reporting entity’s risk appetite

In addition to the steps suggested by the regulatory authorities, reporting entities can also follow some of the industry-wide accepted best practices to further reduce the risk of tipping off.

Best Practices to Follow To Lower the Risk of Tipping Off

In addition to modifying the AML compliance procedures, reporting entities can adopt some of the following best practices to further reduce the risk of breach of the tipping off offence:

Imposing restrictions on access to information on a strict and genuine need-to-know basis
Using legally enforceable agreements or undertakings when disclosing protected information to employees or third parties to maintain the confidentiality of information.
Using secure electronic document storage systems with password protection to prevent easy access to protected information
When appointing any third party to support the reporting entity’s AML/CTF compliance obligations, the reporting entity should, as a best practice, take into consideration the internal controls deployed by the third party to prevent tipping off
When seeking additional information from the customer, use standardised forms or means of communication so the customer is not tipped off and does not feel uneasy about requests for additional information
When training new customer-facing staff, provide them with scripts or clear communication instructions for making additional inquiries

Frequently Asked Questions about Tipping Off Reforms

Can a person be required to disclose protected information to Courts and Tribunals?

A person is not required to disclose protected information to a court or tribunal except where it is necessary to disclose the protected information to give effect to the AML/CTF Act, 2006.

Is disclosing information to a third party allowed under the new tipping off offence?

Reporting entities are not prohibited from disclosing information to third parties under the new tipping off offence so long as it would not or could not reasonably be expected to prejudice an investigation. However, this non-prohibition on disclosure cannot be considered as authorisation for disclosure as other legal restrictions may be applicable to reporting entities, such as the restrictions stipulated in the Privacy Act 1988.

If the reporting entity is of the perception that performing Enhanced Customer Due Diligence (ECDD) will lead to tipping off, should they proceed with ECDD?

While gathering more information about a customer’s identity and source or destination of funds for the purpose of ECDD is not in itself considered as tipping off, if the reporting entity is of the opinion that performing specific ECDD measures would lead to tipping off, then such measures should not be performed.

AML Australia’s Due Considerations Towards the New Tipping Off Reforms

Our experts at AML Australia know the value of long-term business relationships and the need for business risk protection. Therefore, we give due weightage to tipping off requirements when designing AML/CTF programs for our customers so that their business thrives on the foundation of AML compliance.

About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 26 years of experience in governance, risk, and compliance. He helps companies with end-to-end AML compliance services, from conducting Enterprise- Wide Risk Assessments to implementing the robust AML Compliance framework. He has played a pivotal role as a functional expert in developing and implementing RegTech solutions for streamlined compliance.