AUSTRAC Guideline No. 4
- Enclosure 4
(Formerly Enclosure to CTRA Guideline No. 4)
Financial Transaction Reports Act 1988
Areas of Suspect Activity
Securities Offences
In order to further assist Merchant Bankers and Stock Brokers to understand and identify
suspect transactions, set out below are examples of activities which may indicate a breach of
the Corporations Law relating to regulation of the securities market. The examples, which are
not meant to be exhaustive, may be used as a general guide for determining a basis for
suspicion.
(a) A broker suspects that an account which is traded heavily and has a number of profitable
same day trades may be in a false name and be beneficially owned by an employee of the firm.
The broker notices an increase in the number of transactions put through the suspense account
and suspects a connection with the same employee.
(b) A company officer is known to be trading in his own company's securities. Having regard to
the timing, urgency and size of the trades, you suspect that the company officer may be
seeking to profit from his/her insider knowledge of the company and/or to manipulate the price
of the securities in the market.
(c) A client you understand to be close to the controlling interests of a public company
introduces a new customer who immediately begins to acquire a substantial holding in that
company. A takeover offer is announced and the new client almost immediately accepts the
offer. You suspect warehousing.
(d) A client places buy and sell orders in such a way that you suspect an attempt to influence
the share price. This may be attempted by `ramping' or `pump and dump' operations or
possibly using `wash sales' or `matched orders'.
(e) You are invited to underwrite a company share issue. You become aware that the prospectus
does not set out full particulars of the nature and extent of the interest of a director in property
proposed to be acquired. Further, you consider that the valuation of the asset to be acquired is
much inflated.
(f) A rumour that a mining exploration company is about to announce the opening of a new field
has caused the price of shares in that company to rise substantially. A director you understand
to be the source of the rumour engages you to sell a substantial parcel of scrip. You suspect
insider trading. When the rumour is proved false and the share price falls the same director
becomes a buyer. You suspect market manipulation.
(g) A client, in placing a sell order, tells you of a telephone call received from a European
broking firm which is unknown to you. The offer promises fantastic potential profits from certain
investments in South East Asia. The marketing technique leads you to suspect that a `boiler
room' fraud may be operating.
(h) Your firm's internal auditors report to you that a partner in the firm has been systematically
trading ahead of customer orders and that the firm has profited as a result. There is nothing to
suggest that any customers are aware of the practice.
There are as many examples of suspect activity as there are ways to `rort' the securities
market. The examples in this enclosure are by no means exhaustive and should be used as a
general guide for determining a basis for reporting suspect transactions.
Australian Transaction Reports and Analysis Centre (AUSTRAC)
PO Box 5516
West Chatswood NSW 1515
Telephone (02) 9950 0827 Facsimile (02) 9950 0071 DX AUSTRAC 29668