---
title: "Suspicious matter escalation, reporting and legal professional privilege procedure"
url: "https://ailawframework.com/precedents/aml-ctf-the-practice-as-a-reporting-entity/smr-escalation-lpp-procedure"
type: "precedent"
site: "AI Law Framework"
id: "a52ob-smr-escalation-lpp-procedure"
area_id: "A52OB"
kind: "policy"
ai_level: "red"
version: 1
law_stated_as_at: "2026-10-17"
---

# Suspicious matter escalation, reporting and legal professional privilege procedure

> Procedure from internal escalation to lodgement of a suspicious matter report: when the obligation arises, the 24-hour, 3 and 5 business day deadlines, privilege review and LPP forms, what AI may and may not do, client…

Canonical page: https://ailawframework.com/precedents/aml-ctf-the-practice-as-a-reporting-entity/smr-escalation-lpp-procedure  
Law stated as at: 2026-10-17

Site index for agents: https://ailawframework.com/llms.txt

Procedure from internal escalation to lodgement of a suspicious matter report: when the obligation arises, the 24-hour, 3 and 5 business day deadlines, privilege review and LPP forms, what AI may and may not do, client communications and tipping off.

## Key facts

- Kind: Policy. A policy or procedure for a firm or client.
- Practice area: [AML/CTF — the practice as a reporting entity](https://ailawframework.com/precedents/aml-ctf-the-practice-as-a-reporting-entity.md)
- Jurisdictions: Australia
- AI level: Red. Keep AI out of the decisive steps. A lawyer does the work.
- Law stated as at: 2026-10-17
- Status: Maintained. Checked on 2026-10-17 against the 8 authorities it cites, for Australia.

## When to use it

Adopt as part of the AML/CTF program of any practice providing designated services. Use whenever a staff member notices unusual activity, CDD cannot be completed, or a client's instructions raise a concern. It is lawyer-led throughout.

## How AI may be used

Lawyer-led. AI may index the file into a dated chronology and compare the practitioner's completed text against the file for dates, amounts and names, inside a controlled environment, but it writes no part of the report or of anything said to the client.

**AI may:**

- Index the file into a dated chronology of instructions, transactions, communications and documents for the practitioner to read.
- List the report fields for which the file holds no source.
- Compare the practitioner's completed text against the file for dates, amounts, names and account details.

**AI must not:**

- Must not write any part of the SMR, the grounds of suspicion, an LPP form or any client communication.
- Must not decide whether a suspicion is held on reasonable grounds, whether information is privileged, or what the client is told.
- Must not operate outside the practice-controlled environment approved by the compliance officer.

**The lawyer checks:**

- The time the suspicion was formed is recorded and the correct deadline applied.
- Privilege has been assessed item by item, with the basis recorded and independent advice sought where in doubt.
- No disclosure has been made that could tip off, and everyone who knows of the escalation is listed.

## Authorities

- [Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) s 41 (suspicious matter reports: when the obligation arises; 3 business days, 5 business days where some information may be privileged, 24 hours for terrorism financing; LPP forms)](https://www.legislation.gov.au/C2006A00169/latest/text)
- [Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) s 242 (legal professional privilege) and s 41(2A) (refusal where all grounds are privileged)](https://www.legislation.gov.au/C2006A00169/latest/text)
- [Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) ss 123 and 124 (tipping off; inadmissibility of reports)](https://www.legislation.gov.au/C2006A00169/latest/text)
- [Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) s 32(b) (enhanced CDD if continuing after an SMR obligation arises)](https://www.legislation.gov.au/C2006A00169/latest/text)
- [Anti-Money Laundering and Counter-Terrorism Financing Rules 2025 (Cth) (content of suspicious matter reports)](https://www.legislation.gov.au/F2025L01026/latest)
- [AUSTRAC, Legal professional privilege (guidance and LPP forms)](https://www.austrac.gov.au/industry-and-business/obligations-and-guidance/your-amlctf-program/reporting-us/legal-professional-privilege)
- [AUSTRAC, Tipping off (guidance)](https://www.austrac.gov.au/industry-and-business/obligations-and-guidance/your-amlctf-program/reporting-us/tipping-off)
- [Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015 rr 9 and 13 (confidentiality; termination of engagement)](https://legislation.nsw.gov.au/view/html/inforce/current/sl-2015-0244#rule.9)

## Official form

[Official form](https://www.austrac.gov.au/industry-and-business/obligations-and-guidance/your-amlctf-program/reporting-us/legal-professional-privilege)

## Full text and drafting notes

The full text and the drafting notes are not part of this public page. Signed-in firm accounts can read them at https://ailawframework.com/precedents/aml-ctf-the-practice-as-a-reporting-entity/smr-escalation-lpp-procedure and through the signed-in MCP connector https://ailawframework.com/mcp/firm.

*Practice guidance for planning and review. Confirm current primary sources and the requirements of the actual matter. This is general information, not legal advice.*