Police in Iran say Sydney cafe gunman Man Horan Monis was wanted in his home country over a fraud committed almost 20 years ago.
Three people died as the 16-hour siege came to a dramatic end just after 2am local time when armed police stormed the building.
One was the 50-year-old "lone gunman" who Iranian police say fled to Malaysia after committing fraud while working as the manager of a travel agency in 1996.
Following legal proceedings in 2000, Iran's judiciary reportedly informed Interpol about his crime and demanded his extradition from Australia.
Australia allegedly refused to do so, saying it did not have a criminal extradition agreement with Iran.
Shortly after laying flowers near the scene, prime minister Tony Abbott labelled radical group Islamic State a "death cult" and said there were questions to be answered over why Monis had been freed on bail.
He confirmed that he was not on a terrorism watch list.
"This has been an absolutely appalling and ugly incident - that's the only way to describe it. Our hearts go out to the families of Katrina Dawson and Tori Johnson. These were decent ordinary people who were going about their ordinary lives.
"Decent, innocent people who were caught up in the sick fantasy of a deeply disturbed individual."
He added Monis "certainly had been well-known to the Australian Federal Police... but I don't believe that he was on a terror watch list at this time."
A year before the cafe siege Monis was released on bail after being accused of involvement in his wife's murder, adding to a string of sex charges against him.
Police deputy commissioner Catherine Burn commented: "He was on bail and in terms of that matter, his movements will form part of the critical investigation.
"He has clearly made some statements. This is a man who had a serious history of offences and a history of violence. A man we do believe had some extremist views and we also believe he was unstable.
"We will clearly have a look at all the things we can find out about him so we can determine what might have triggered anything."
She refused to speculate on the actions of the cafe manager, when asked if he had acted heroically.
"I'm not going to talk about individual actions at all. This will all come out in time but can I just say every single one of the hostages, every single one of those victims was courageous," she added.
Earlier, police commissioner Andrew Scipione told reporters that 17 hostages had been accounted for in total, including five who escaped early in the attack.
He added that the Lindt cafe had been secured and no explosive devices found.
Mr Scipione said the incident was "isolated" and urged people not to "speculate" about what had happened, adding police believed more lives could have been lost had they not taken action.
"Events that were unfolding inside the premises led them to the belief that now was the time to actually deploy, and they did," he said.
"I understand there were a number of gunshots that were heard, which caused officers to move towards an emergency action plan."
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