JFSC CRAs for Legal Structures: Triggers for Complexity and High Risk

Executive Summary

1. The Jersey Financial Services Commission (JFSC) has proposed enhancements to the Anti-Money Laundering (AML), Counter-Terrorist Financing (CTF), and Counter-Proliferation Financing (CPF) Handbook, introducing a refined framework for conducting Customer Risk Assessments (CRAs) on legal structures to better identify triggers for complexity and high risk.
2. Stemming from the 2025 follow-on consultation (see appendix to this note), which follows a consultation to overhaul the AML/CFT/CPF Handbook with a particular focus on complex structures. The consultation promotes a proportionate, risk-based approach, enabling supervised firms to effectively mitigate ML/TF/PF  risks while aligning with international standards from MONEYVAL and the Financial Action Task Force (FATF).
3. The JFSC proposed enhancements build on the existing two-stage CRA process to create a three-stage approach – these stages being:-
   1. For all customers – natural or legal,
      1. Step 1 - Assess exposure to  Enhanced Due Diligence (EDD) triggers under Article 15 of the Money Laundering (Jersey) Order 2008,
         • Remembering that Article 15 does not automatically trigger high-risk
      2. Step  2 - Undertake a risk assessment, assigning risk levels (lower risk, standard risk, higher risk, or high risk)
         • Remembering where there is a high risk, apply enhanced due diligence
   2. And for legal structures,
      • • Step 3 - Assess them for complexity and high risks by incorporating distinctions between:
          • Standard-risk legal structures
            • Featuring standards companies or trusts requiring no additional measures
          • Standard-risk complex structures
            • Featuring elements like multi-layered ownership that warrant enhanced scrutiny but not automatic high risk, and
          • High-risk complex structures
            • Where complexity combines with factors such as opacity or links to high-risk jurisdictions, mandating EDD and elevated monitoring

Introduction

• In Jersey, every customer of a supervised firm under anti-money laundering (AML), counter-terrorist financing (CTF), and counter-proliferation financing (CPF) regulations must undergo a Customer Risk Assessment (CRA).
• The purpose of the CRA is to evaluate ML/TF/PF risks through a two-stage process.

CRA two-stage process.

• Stage 1: Identify Triggers for Enhanced Due Diligence (EDD)
• Identify customers with any EDD triggers under Article 15 of the Money Laundering (Jersey) Order 2008 (MLO), such as politically exposed persons (PEPs) or high-risk jurisdictions.
• Note: An Article 15 trigger requires EDD but does not automatically result in a higher risk classification; risk level is determined in Stage 2.
• Stage 2: Assign Risk Level
• Classify customers as:
• Lower risk
• Standard risk
• Higher risk
• High risk

NEW CRA ELEMENT - assessing customers that are legal structures, introducing layers to identify complexity and high risk.

• In addition to this core process, the JFSC's 2025 follow-on consultation proposes enhancements for assessing customers that are legal structures, introducing layers to identify complexity and high risk.
• This promotes a proportionate, risk-based approach. The proposal categorises legal structures into three types:
• Standard-Risk Legal Structure: Standard risk.
• Standard-Risk Complex Structure: Higher than standard risk (but not automatically high risk).
• High-Risk Complex Structure: Deemed high risk when supervised persons identify contributing high-risk factors.

HOW TO DISTINGUISH BETWEEN THE LEGAL STRUCTURE CATEGORIES

To clarify these JFSC requirements, the following Jersey-specific explanations distinguish between the categories.

Standard-Risk Legal Structure

1. 1. A basic legal form under Jersey law that, in itself, does not elevate ML/TF/PF risk.
   2. Examples:
      1. Companies
      2. Partnerships (LP, LLP, GP)
      3. Foundations
      4. Trusts
      5. Incorporated or unincorporated bodies
   3. Risk Position:
      1. Treated as standard risk under the proposed framework.
      2. No EDD required solely due to the legal form.

• • • • *Warning: If Article 15 MLO triggers (e.g., PEP) exist, apply EDD without elevating overall risk.

Standard-Risk Complex Structure

1. 1. A legal structure with added complexity (e.g., multi-layered ownership, cross-border elements) that complicates due diligence but does not meet the high-risk threshold.
   2. Typical Indicators of Complexity:
      1. Multi-layered ownership or control
      2. Cross-border chains
      3. Use of trusts, foundations, or nominees
      4. Opaque, fragmented, or difficult-to-verify ownership
   3. Risk Position:
      1. Treated as a "higher than standard risk" indicator under Section 4 (Customer Due Diligence, CDD).
      2. Requires enhanced scrutiny and mitigating measures but does not trigger EDD* unless additional high-risk factors emerge.  *Warning: If Article 15 MLO triggers (e.g., PEP) exist, apply EDD without elevating overall risk.
      3. Complexity alone does not equal high risk.

High-Risk Complex Structure

1. 1. A complex structure where complexity combines with high-risk indicators to elevate ML/TF/PF risk, mandating EDD.
   2. High-Risk Indicators:
      1. Opacity preventing beneficial ownership (BO) verification
      2. Links to high-risk jurisdictions (e.g., FATF grey/black lists, secrecy jurisdictions)
      3. Unclear or weak economic purpose
      4. Unusual or unjustified layering
      5. PEP involvement combined with opacity
      6. Adverse media or high-risk sector exposure (e.g., virtual assets, extractives)
   3. Risk Position:
      1. Classified as high risk under Section 7 (EDD).
      2. EDD is mandatory, with additional risk management and monitoring.

Jersey-Specific Summary for Risk Assessing Legal Structures

• Legal Structure: Standard risk.
• Standard-Risk Complex Structure: Higher than standard risk indicator (not automatically high risk).
• High-Risk Complex Structure: High risk when complexity contributes to elevated factors.

Decision Tree for Assessment

• Use this step-by-step process to evaluate legal structures under the proposed framework.

Step 1: Determine if the Structure is Complex.

• Ask: Does the structure exhibit complexity characteristics? Examples (from JFSC consultation):

1. Multiple layers of ownership or control
2. Cross-border chains or jurisdictions
3. Use of trusts, foundations, or nominees
4. Opaque, fragmented, or challenging-to-verify control
5. Unusual structuring disproportionate to the purpose
• If NO: Not complex
1. → Apply standard CDD*
2. → End.
• *Warning: If Article 15 MLO triggers (e.g., PEP) exist, apply EDD without elevating overall risk.
• If YES: Proceed to Step 2.

Step 2: Assess if Complexity Contributes to High ML/TF/PF Risk

• Ask: Does the complexity increase ML/TF/PF risk?
• The JFSC proposes EDD only where complexity elevates risk, not merely because it exists.
• Indicators of High Risk:
• Beneficial ownership is difficult  to verify or obscured
• Involvement of high-risk jurisdictions
• Unclear or inconsistent economic purpose
• Unnecessary layering without rationale
• PEPs with opacity or cross-border elements
• Difficult-to-corroborate source of wealth/funds
• Inherently high-risk industry/sector

• If NO: Complexity present but not high risk
• → Apply Section 4 CDD* with mitigating measures
• → Document rationale
• → End.
• *Warning: If Article 15 triggers exist, apply EDD without elevating overall risk.
• If YES: Proceed to Step 3.

Step 3: Apply EDD and Rate as High Risk

• When complexity contributes to high risk (per JFSC Section 7 AML/CFT/CPF Handbook  revisions):
• Perform enhanced BO verification
• Obtain a corroborated source of wealth/source of funds
• Require senior management approval
• Increase monitoring and review frequency
• Assess cross-border flow risks
• Document the enhanced risk assessment and rationale
• EDD is mandatory in these cases.

Sources

• JFSC Follow-on Consultation: AML/CFT/CPF Handbook Enhancements - Complex Structures (PDF): https://www.jerseyfsc.org/media/dimjchjk/follow-on-consultation-aml-cft-cpf-handbook-enhancements-complex-structures.pdf
• Drop-in Session: Follow-on Consultation on Complex Structures: https://www.jerseyfsc.org/news-and-events/drop-in-session-follow-on-consultation-on-complex-structures
• Money Laundering (Jersey) Order 2008: https://www.jerseylaw.je/laws/current/ro_20_2008
• Legal Persons / Legal Arrangements National Risk Assessment (2023): https://www.gov.je/SiteCollectionDocuments/Industry%20and%20finance/Legal%20Persons%20and%20Legal%20Arrangements%20National%20Risk%20Assessment,%20July%202023.pdf

Appendix 1

Below is a clear, up-to-date briefing on the JFSC’s plans for complex structures, based entirely on the latest publicly available information from 2025–2026.

JFSC PLANS FOR COMPLEX STRUCTURES — BRIEFING (2025–2026)

1. Background

In June 2025, the JFSC launched a major consultation to overhaul the AML/CFT/CPF Handbook with a particular focus on complex structures. This work was driven by:

• Recommendations from MONEYVAL require more straightforward, stronger, and more user-friendly guidance. [jerseyfsc.org]
• Industry concerns around how complexity is defined and managed in customer due diligence.

The JFSC received extensive industry feedback, leading to a complete rewrite of the sections on complex structures. [jerseyfsc.org]

A follow-up consultation was issued on 27 November 2025, specifically focused on these rewritten sections. [jerseyfsc.org]

2. What the JFSC Is Changing

Based on the follow-up consultation and public briefings, the JFSC is planning to implement the following changes:

A. Clearer Distinction Between Standard and Enhanced CDD

The JFSC is restructuring its guidance to distinguish between:

• Standard CDD (Section 4):Guidance on identifying complex structures and applying mitigating measures when the risk is not high. [comsuregroup.com]
• Enhanced Due Diligence (Section 7):Codes and guidance for when complexity is a contributing factor to a high-risk customer assessment. [comsuregroup.com]

This creates a more risk-based and proportionate framework across the sector. [comsuregroup.com]

B. Revised Definitions and Identification Criteria

Following workshops and industry feedback, the JFSC has:

• Rewritten the codes and guidance for complex structures.
• Sought to make the definitions more transparent, more practical, and aligned with international expectations (esp. MONEYVAL). [jerseyfsc.org]

This includes clearer indicators of complexity, challenges related to beneficial ownership, and multi-layered structures.

C. Application Across All Supervised Persons

The revised framework will apply to:

• Financial institutions
• DNFBPs
• Virtual asset service providers (VASPs) [comsuregroup.com]

The JFSC emphasises that all supervised persons must reassess how they identify and manage complexity risks.

3. Engagement and Outreach

To support industry understanding, the JFSC has been holding events, including:

JFSC Drop-in Session — 20 January 2026

• Held at Town Hall, St Helier.
• Purpose: open discussion on the complex structures consultation; ensure the Handbook remains practical, proportionate, and aligned with global standards. [comsuregroup.com]

4. Consultation Timelines

From the JFSC’s official consultation communications:

• Feedback deadline: 12 February 2026
• Publication of revisions: 26 March 2026
• Effective date for new rules: 31 May 2026 [comsuregroup.com]

This means the new complex-structure requirements will become binding from mid‑2026.

5. Strategic Direction & Regulatory Context

These changes are part of:

• A wider set of 2025–2026 consultation initiatives (e.g., Schedule 2 changes, AIFMD II, Basel III roadmap). [jerseyfsc.org]
• A broader shift in Jersey’s regulatory strategy following increased international scrutiny (noted throughout the JFSC Annual Report 2024). [statesassembly.je]

Summary

• The JFSC’s plans for complex structures involve a comprehensive rewrite of the AML/CFT/CPF Handbook guidance.
• The overarching theme is a more proportionate, risk-based approach with clearer expectations for identifying, assessing, and mitigating complexity.
• The new framework is expected to take effect on 31 May 2026, after final revisions are published in March 2026.

Web Links (Sources)

JFSC consultations & guidance

• Follow-on Consultation: AML/CFT/CPF Handbook Enhancements – Complex Structureshttps://www.jerseyfsc.org/industry/consultations/follow-on-consultation-amlcftcpf-handbook-enhancements-complex-structures/ [jerseyfsc.org]
• JFSC Drop-in Session Announcement (20 Jan 2026)
  https://www.comsuregroup.com/news/20-january-2026-jfsc-drop-in-session-on-complex-structures/ [comsuregroup.com]
• JFSC Consultation Overview Page
  https://www.jerseyfsc.org/industry/consultations/ [jerseyfsc.org]

Additional related reference

• Jersey Finance summary of Consultation Paper No. 8 (2025)
  https://www.jerseyfinance.com/insights/jfsc-consultation-paper-no-8-2025-follow-on-consultation-aml-cft-cpf-handbook-enhancements-complex-structures/ [jerseyfinance.com]