Behaviour and relationship patterns
AUSTRAC's sector risk insights and indicators emphasise that a single indicator is not proof. The assessment should consider the customer's profile, the service, the transaction and the context. Record what was observed and why it did or did not escalate.
- Secrecy: reluctance to provide documents, or pressure to complete without questions
- Rapid changes: instructions, parties, structure or funding that change abruptly
- Third parties: unexplained payments from or to people outside the matter
- Unusual complexity: layers of entities or trusts with no apparent economic purpose
- Avoidance: structuring activity to stay under thresholds or avoid review
Payment and source-of-funds patterns
Source-of-funds review is where professional practices catch laundering, because the transaction is the point where illicit money becomes legitimate-looking. The question is not whether the client has 'enough' money; it is whether the money can be explained by the client's activities.
- Cash, third-party cheques or transfers inconsistent with the customer's profile
- Funds that appear from an unrelated person, entity or jurisdiction
- Source-of-funds explanations that are vague, contradictory or change over time
- Early repayment or settlement with funds whose origin cannot be traced
- Use of virtual assets, gift funds or loans to obscure the true source
Structure and entity patterns
For trust and company service providers and accountants, the structure itself can be the laundering mechanism. Layered ownership is not suspicious by itself, but layers without purpose, rapid changes and undisclosed controllers warrant enhanced review.
- Companies or trusts created without an operating purpose
- Beneficial owners who cannot be identified or who avoid disclosure
- Registered office, nominee or trustee roles used to obscure control
- Entities in high-risk jurisdictions with no commercial reason
- Frequent changes to directors, trustees or ownership shortly before a transaction
What to do with a pattern
The red flag guide is complete only when it connects to an action. Every pattern should resolve to a documented decision: cleared, enhanced, refused, exited or reported - with the reasoning an examiner can follow.
- Apply the program's escalation path and record the assessment
- Gather proportionate source-of-funds or purpose evidence
- Where suspicion is formed, lodge the SMR within the deadline
- Protect SMR-related information from tipping off
- Refuse or exit where CDD cannot be completed or risk cannot be managed
Official sources
Use these primary AUSTRAC pages to confirm the current rules and apply them to your circumstances.
Frequently asked questions
Is a red flag the same as a suspicion?
No. A red flag is an observation that warrants assessment. A suspicion is the statutory test for an SMR. Assess each flag in context before deciding whether the test is met.
Do we need to investigate every unusual pattern?
No. The program should define proportionate responses by risk. Some patterns warrant a document request, others enhanced monitoring and others immediate escalation. Record the reasoning.
Can we tell the client we are suspicious?
No. Disclosing protected SMR-related information where it could prejudice an investigation is tipping off. Use genuine CDD questions and operational reasons instead.
Where do AUSTRAC risk indicators come from?
AUSTRAC publishes risk insights and indicators for sectors including real estate, precious metals and stones, and virtual asset service providers, alongside general guidance on responding to unusual transactions.
Put it into practice
Cassandra AML turns these obligations into a working system: designated-service decisions, customer due diligence, screening, monitoring and reporting records — hosted in Sydney, free to start.
This guide is general information for Australian professionals. It is not legal advice and does not replace the AML/CTF Act, the AML/CTF Rules or AUSTRAC guidance. Confirm your specific obligations with AUSTRAC or a qualified legal adviser. See our editorial and correction standards.