JFSC Complex structures rules

In November 2025, the JFSC published a follow-up consultation seeking your feedback on proposals to split the complex structures guidance in the AML/CFT/CPF handbook into two parts. In response to INDUSTRY feedback, the JFSC have:

• Kept simple baseline indicators and clarified that they are non-prescriptive
• Adjusted wording to reflect common Jersey structures
• confirmed that complexity alone does not trigger high-risk classification or enhanced due diligence (EDD)
• Removed measures from the EDD section that were considered standard customer due diligence

EXECUTIVE SUMMARY

1. The Jersey Financial Services Commission (JFSC)  received 13 responses (mainly from the trust company business sector, plus banks, fund services, and trade bodies).
2. Industry broadly welcomed the two-tier, risk-based approach:
1. Normal CDD for most structures, with
2. EDD applied only where complexity actually drives a high-risk customer assessment.
3. The JFSC has made targeted revisions to
1. Section 4.8 (identifying/assessing complex structures) and

4. 4.8  Assessing Complex Structures https://www.jerseyfsc.org/media/cevnoqcr/section-48.pdf

1. Section 7.8 (EDD measures) to address feedback on over-prescriptive numerical thresholds, unclear terminology, sector neutrality, and proportionality.

7. 7.8  Complex high-risk structures = https://www.jerseyfsc.org/media/vovjnu3a/section-78.pdf

1. The revised sections
1. Replace the earlier drafts in the consolidated AML/CFT/CPF Handbook and go live on 31 May 2026.
2. Do not create new statutory obligations; the changes are almost entirely guidance (one unchanged Code of Practice remains).
3. Show that existing customers will be addressed through normal periodic reviews and trigger events, not an immediate wholesale refresh.
2. Firms that already apply a sensible, risk-based approach to CUSTOMERS that are legal persons/arrangements (STRUCTURES) will find the updated guidance largely confirmatory rather than disruptive.

KEY SUMMARY OF THE UPDATE REQUIREMENTS

The JFSC has refined the guidance to be more practical, proportionate, and sector-neutral.

Key changes include:

Section 4.8 – Complex structures in CDD

• Indicators of complexity (layers, jurisdictions, etc.) are now explicitly non-prescriptive and non-exhaustive.
• Numerical baselines have been raised/adjusted to avoid capturing ordinary Jersey structures.
• Emphasis is placed on opacity and lack of commercial rationale rather than structural size or form.
• Sectoral context is now acknowledged: what is complex in one sector may be standard in another.
• Clear statement that complexity does not automatically equal higher risk.

Section 7.8 – Enhanced Due Diligence

• EDD applies only where complexity contributes to a high-risk customer assessment (explicit alignment with Code of Practice 73).
• EDD list is expressly non-exhaustive and not a checklist; firms may reuse EDD obtained under other triggers.
• Standard CDD steps have been removed from the EDD section.
• Source of Wealth/Source of Funds requirements have been narrowed (no blanket application to all controllers—only where they contribute funds or exercise meaningful control/economic interest).
• Firms may use independent sources or external expertise (where proportionate) to corroborate rationale, ownership, or flows.

Implementation

• Effective date: 31 May 2026.
• Existing customers:
• Addressed via periodic reviews or trigger events
• THERE IS no immediate back-book exercise required
• Firms must update policies, procedures, and training by the go-live date.

KEY ACTION LIST FOR THE READER

1. Update internal policies, procedures, and risk-assessment methodologies to reflect the clarified indicators, non-prescriptive language, and high-risk triggers for EDD.
2. Brief and train relevant staff (compliance, onboarding, relationship management) on the revised approach, particularly the distinction between standard complex structures and those requiring EDD.
3. Review and amend customer risk assessment templates to incorporate the new guidance on opacity, commercial rationale, and sector context.
4. Plan implementation timeline: complete policy/procedure updates by 31 May 2026; incorporate any necessary changes for existing customers at the next periodic review or trigger event.
5. Consider attending any further JFSC drop-in sessions or webinars (the paper states these are being explored).
6. Document your firm’s interpretation of the guidance to demonstrate a proportionate, risk-based approach during future examinations.

ISSUES TO WATCH OUT FOR

• Misinterpretation of indicators as fixed tests – the JFSC has explicitly made them non-prescriptive, but supervisors may still scrutinise firms that appear to apply rigid numerical cut-offs.
• Over-application of EDD – ensure EDD is triggered only when complexity genuinely contributes to a high-risk rating; automatic EDD on any complex-looking structure is no longer acceptable.
• Terminology consistency – the paper acknowledges ongoing broader work on the definition/scope of “customer” vs “structure”; watch for future clarification in the wider Handbook.
• Sector neutrality – the guidance is deliberately sector-agnostic; firms in fund services, banking, or DNFBPs must not default to TCB-centric interpretations.
• Supervisory expectations – the JFSC has emphasised that the guidance assists in applying existing standards and will be applied proportionately; however, firms should still be able to demonstrate clear, documented decision-making on complex structures.

SECTION 7.8 EXECUTIVE SUMMARY

7.8  Complex high-risk structures = https://www.jerseyfsc.org/media/vovjnu3a/section-78.pdf

This document is the final revised Section 7.8 of the Jersey AML/CFT/CPF Handbook (effective 31 May 2026).

It sets out the single unchanged Code of Practice (COP73) and the accompanying guidance on complex high-risk structures.

The core message is clear and risk-based:

Complexity alone does NOT trigger EDD.

EDD is required only when the structure's (or linked arrangements') complexity actually contributes to the customer being assessed as high-risk.

The section reflects the JFSC’s commitment in the March 2026 feedback paper: a proportionate, non-prescriptive, sector-neutral approach with a narrowed scope for Source of Wealth/Source of Funds, and explicit permission to reuse the EDD rationale for standardised, transparent structures. It is deliberately short (2 pages) and principles-based, avoiding checklists.

KEY REQUIREMENTS

1. Mandatory Code of Practice [COP73] A supervised person must apply proportionate and relevant EDD where both of the following are met:
• The structure is complex, and
• The complexity contributes to the customer being assessed as high-risk.
2. EDD Trigger & Scope (Guidance 81)
• Complexity is not an automatic high-risk factor.
• EDD is triggered only if the complexity leaves the rationale unclear, BO/control information incomplete, or further enquiry is required.
• EDD is centred on the customer. Surrounding arrangements are considered only to the extent needed to establish beneficial ownership, control, or purpose.
• If transparency cannot be achieved after reasonable enquiries + proportionate EDD → consider declining/exiting the relationship and assess SAR obligations.
3. Enhanced CDD Measures (Guidance 82) – non-exhaustive list
4. Establishing Legitimacy         O
• Obtain supporting documentation (legal opinions, tax advice, board approvals, etc.) proportionate to risk. For standardised & ultimately transparent complex structures, firms may document the rationale once in policies and confirm it applies (with adjustments) instead of repeating full EDD each time.
5. Source of Wealth & Funds  
• Targeted verification for beneficial owners.
• Controllers who do not contribute funds and have no economic interest would not normally require SoW/SoF.
• Obtain only targeted information when controllers contribute funds, exercise material control, or red flags exist.
6. Understanding transactional flows (where flows drive complexity)        
• Evidence expected flows (funding, distributions, fees) and assess any unusual routings that lack commercial purpose.
7. Independent Verification     
• Where proportionate, use external sources or experts (due diligence reports, legal/accounting opinions, forensic reviews) to corroborate rationale, ownership/control, or flows.
8. Face-to-Face 
• In high-risk cases, consider meeting the ultimate beneficial owner (or equivalent) where feasible.
9. Ongoing Monitoring  
• Please adjust the frequency/triggers if complexity materially increases risk beyond the baseline high-risk schedule.
10. Senior Management Approval            
• Require sign-off before onboarding or continuing any high-risk relationship where complexity contributes to the rating. Document the residual risk and mitigations.

Practical issues / watch-outs for firms

• Reuse of EDD (82a) is a helpful concession, but firms must document the standardised rationale in policies and confirm applicability on a per-customer basis. Examiners will expect evidence of this process.
• SoW/SoF language still leads with “beneficial owners”, then carves out controllers — ensure relationship managers do not apply it blanket-style to all controllers.
• “Linked arrangement” terminology appears in 81. The feedback paper noted that the broader definition/scope of “customer” is still under review; this may be clarified in future Handbook updates.
• No examples are provided (deliberate JFSC choice). Firms must develop their own sector-specific guidance and be prepared to defend their application during examinations.
• Proportionality is emphasised throughout, but the burden remains on the firm to demonstrate why EDD was (or was not) applied and why measures were proportionate.
• Senior management approval (82g) now explicitly ties to complexity-driven high-risk — this is a new formal requirement that will need updating in policies and board/committee terms of reference.

Section 4.8 EXECUTIVE SUMMARY

4.8  Assessing Complex Structures https://www.jerseyfsc.org/media/cevnoqcr/section-48.pdf

This document is the final revised Section 4.8 of the Jersey AML/CFT/CPF Handbook (effective 31 May 2026).

It sets out the statutory requirements and practical guidance for assessing complex structures during customer due diligence (CDD). The core principles are:

• Complexity is context-sensitive and sector-specific — what looks complex in one sector may be standard business-as-usual in another.
• Complexity alone does NOT equal higher ML/TF/PF risk.
• The focus is on transparency, commercial rationale, and opacity rather than structural size or arbitrary numbers.
• Numerical indicators are explicitly non-prescriptive and non-exhaustive (with “typically three or more” as soft baselines).

The section works hand-in-hand with the revised Section 7.8 (Complex high-risk structures) and provides a clear decision path: apply standard CDD first; only move to EDD where complexity creates genuine opacity or unresolved issues after reasonable enquiries.

KEY REQUIREMENTS

1. Statutory Foundation (paras 242–243)
• Understand the customer’s ownership and control structure and its ability to enter contracts (Art 3(2)(c)(ii) MLO).
• Obtain and use information on the purpose and intended nature of the relationship to ensure transactions are consistent with the customer’s risk profile (Art 3(2)(d) & 3(3) MLO).
• Consider business risk factors (size, nature, structure) when deciding the extent of testing (Art 11(12) MLO).
2. Standard Structures - When No Complexity Assessment is Needed (para 244)
• No assessment required for obviously simple cases (natural persons on personal products, sole traders, simple partnerships) where no multi-layer ownership/control or linked complex structures exist.
3. Indicators of Potential Complexity (para 247)Non-prescriptive, non-exhaustive list (use as guidance only):
• Multiple ownership/control layers (typically three or more between customer and beneficial owner).
• Multi-jurisdictional features (typically three or more — incorporation/formation or tax residence).
• Use of different types of legal persons/arrangements (typically three or more).
• Complicated ownership/control rights (e.g. differential rights, multiple share classes, carried interest waterfalls).
• Fragmented administration (multiple service providers across key layers).
• Transactional/payment flows that are complex for the business model, difficult to trace, or pass through higher-risk countries without clear commercial purpose.
4. Risk Assessment & Decision Process (paras 248–250)
• Assess actual risk by looking at: transparency of ownership/control, jurisdictions & information reliability, business purpose/fund flows, and existing mitigating measures.
• In the customer risk assessment, check whether potential complexity aligns with the customer’s risk profile, stated purpose, BO information, and source of funds/wealth.
• Standard CDD sufficient → if rationale is clear and BO/control is adequately evidenced/verified → record the conclusion and stop.
• Move to EDD → only if, after standard CDD, the rationale remains unclear or BO/control verification is incomplete and further enquiry is required (see Section 7.8).
5. Sector Context & Staff Guidance (para 245) Firms may issue internal guidance on sector-typical features that have legitimate rationales. Unusual features or opacity trigger consideration of EDD.

Practical issues / watch-outs for firms

• “Typically” thresholds — although the JFSC made them non-prescriptive, some examiners may still treat “three or more” as a soft red flag. Firms should document why a structure with 3+ layers/jurisdictions was not considered complex (e.g. sector norm, clear rationale).
• No examples provided — deliberate JFSC choice to keep guidance sector-neutral, but this places the burden on firms to develop and evidence their own sector-specific interpretations.
• “Fragmented administration” and “transactional flows” added as indicators — these are helpful but subjective; ensure relationship managers are trained on what constitutes “lack of commercial purpose”.
• Terminology (“customer” vs “linked arrangements”) — still not fully resolved (feedback paper noted this is under broader review). Watch for future Handbook clarification.
• Documentation expectation — para 250 and 245 require firms to record conclusions on transparency and rationale. This will be a key focus of the examination.
• Sector neutrality — guidance is deliberately sector-agnostic; TCB-centric interpretations should not be applied to banking, funds, or DNFBP clients.

SOURCES

• Please review the full feedback on the follow-up consultation: AML/CFT/CPF Handbook enhancements to complex structures.
• https://www.jerseyfsc.org/industry/consultations/feedback-on-follow-on-consultation-amlcftcpf-handbook-enhancements-to-complex-structures/
• 4.8  Assessing Complex Structures https://www.jerseyfsc.org/media/cevnoqcr/section-48.pdf
• 7.8  Complex high-risk structures = https://www.jerseyfsc.org/media/vovjnu3a/section-78.pdf