The Future of the Jersey AML Reliance Framework

The JFSC wants

• To remove the requirement to periodically test reliance arrangements (where YOU rely on another regulated firm's due diligence rather than repeating it) and replace it with a judgement-based "adequate steps" standard.

Alongside that:

• Formal recognition of digital ID/eKYC providers (with limits),
• A requirement to refresh written assurances periodically rather than once, a more flexible "without delay" timeframe for obtaining evidence of identity,
• Clearer rules on when reliance must stop, and
• Some paperwork simplification.

None of this is in force yet; it all lands on 31 October 2026, and the JFSC wants industry input by 18 August 2026.

• Why it matters to YOU:
• Less administrative burden if YOU get this right,
• But the JFSC is removing the one hard, checkable rule (mandatory testing) in an area their own most recent inspection data shows is a growing weak spot;
• Testing-related failures went up, not down, between their 2019 and 2023 reviews.
• That's the central tension of this whole document.
• The one thing to remember:
• Don't treat "adequate steps" as a lighter version of testing.
• Internally, it should be held to at least the same standard, until YOU have our own evidence that a lower bar is safe.
• YOU should check whether you're relying directly on any eKYC provider. The new rules don't allow that; reliance must run through a regulated firm that uses one.
• What YOU need to decide before 18 August:
• (1) respond to the reliance questions only, or the whole paper coordinated with the MLCO decision, not made separately.
• (2) start mapping our reliance arrangements against "adequate steps" now, rather than waiting for October.
• (3) if YOU want the equivalent-jurisdictions list industry asked for, say so now; it's not part of this reform and won't come automatically.

1. Summary of the Consultation Paper

Consultation Paper No. 7 2026, issued by the JFSC on 7 July 2026, proposes amendments to the Handbook for the prevention and detection of money laundering, the countering of terrorist financing, and the countering of proliferation financing (the Handbook).

• MLCO framework (Section 3 of the paper, Questions 1–6): the risk-based MLCO appointment test, decoupling of MLCO responsibility from day-to-day monitoring, and the senior management level requirement. Covered in a companion briefing.
• Reliance framework (Section 4 of the paper, Questions 7–14): the removal of mandatory testing for reliance arrangements, treatment of digital ID/eKYC providers, a new requirement to periodically refresh written assurances, specified circumstances under which reliance must cease, and a modernised Appendix C written-assurance template. This is the subject of the present briefing.

The Consultation Paper No. 7

• The changes predominantly give effect, at Handbook level, to amendments already made to the Money Laundering (Jersey) Order 2008 (MLO) by the Money Laundering (Jersey) Amendment Order 2026, made 17 April 2026. The paper forms part of Workstream 2 of the Financial Services Competitiveness Programme, a joint initiative of the Government of Jersey, the JFSC and Jersey Finance.
• Is a single document covering two distinct regimes, with one response form and one closing date of 17:00 on 18 August 2026:
• Has fourteen questions in total posed across both regimes. Responses must indicate, for each question, whether the respondent supports, supports with concerns, or does not support each proposal, with a free-text rationale. The JFSC has stated it will review responses, consider adjustments, and publish a final Handbook update, giving industry notice ahead of implementation.

2. Executive Summary on RELIANCE FRAMEWORK only

• This briefing focuses on the reliance framework only (Section 4 of the paper, Questions 7–14).
• The MLCO framework is outside its scope and is addressed in a companion briefing.
• The reliance regime, under Articles 16 and 16A of the MLO,
• Governs the conditions under which a supervised person may rely on identification measures (customer due diligence) applied by an obliged person, or an external person in a group reliance arrangement, rather than repeating that due diligence itself.
• This consultation proposes amendments to the Handbook to reflect legislative changes already made to Articles 16 and 16A, with the changes taking effect from 31 October 2026.
• Unlike the MLCO reforms, none of the reliance changes is yet in force.
• Core aims, in the JFSC's own language:
• Simplify and modernise the requirements, introduce greater flexibility, and reduce unnecessary operational burdens, in particular through the removal of mandatory testing requirements, while maintaining a risk-based and proportionate approach.

Key legislative and Handbook changes proposed (all effective 31 October 2026)

• Mandatory testing of reliance arrangements is removed from the MLO.
• In its place, a new Code of Practice (COP53) will require supervised persons to evidence that they have taken 'adequate steps', based on a risk assessment, to be satisfied that evidence of identity can be obtained promptly from the obliged person on request.
• A supervised person may now
• Place reliance on an obliged person for information on the purpose and intended nature of the business relationship, with proposed wording emphasising that the supervised person remains responsible for understanding its own customer.
• Digital ID / eKYC providers
• Are addressed for the first time: reliance may be placed on an obliged person that has itself used an eKYC provider to meet its own CDD obligations,
• But reliance cannot be placed directly on the eKYC provider, since such providers are not 'obliged persons' within the meaning of the MLO.
• A new statutory requirement on timings to obtain updated written assurance
• At intervals the supervised person itself determines, based on its knowledge of the customer, the business, and the risk profile, replacing a static, one-off assurance model.
• The definition of 'without delay', for obtaining evidence of identity from an obliged person, becomes more flexible:
• Any period beyond two working days is now assessed case-by-case, meaning a period beyond five working days currently treated as not 'without delay' could be acceptable depending on circumstances.
• The circumstances in which reliance must cease are now specified directly in Articles 16(9A) and 16(9B) of the MLO,
• Rather than being triggered by deficiencies found through mandatory testing.
• COP55 guidance covers the steps to take once reliance ceases.
• Group codes
• The two Codes of Practice relating to Group reliance are proposed for removal, on the basis that they duplicate statutory provisions.
• The Appendix C written assurance template
• Is proposed to be modernised to reflect the amended Articles 16 and 16A.

What this consultation does not address

• Several respondents to the earlier Government of Jersey consultation raised the possibility of reintroducing an equivalent-jurisdiction list, a standing list of jurisdictions whose AML regimes are recognised as broadly equivalent to Jersey's, to simplify reliance decisions involving overseas obliged persons.
• The JFSC has stated it intends to consider this later, alongside a review of Appendix D1 and D2, and is not proposing changes to Section 1.9 of the Handbook as part of this consultation.
• This is a genuine gap between what industry asked for and what this paper delivers, and the Board should not assume it is coming as part of this round of reform.

Verdict for the Board

• The direction of travel is broadly sound:
• Replacing a blanket mandatory-testing requirement with a risk-based 'adequate steps' standard is consistent with FATF's proportionality principle, and
• The digital ID/eKYC clarification reflects how due diligence is actually being conducted in practice.
• The written-assurance refresh requirement is, if anything, a strengthening of ongoing oversight relative to a one-off assurance model, which is a point in the proposals' favour that is easy to overlook amid the general deregulatory framing.
• However, the Board should treat this verdict as conditional in a specific way that differs from the MLCO half of the paper.
• The JFSC's own thematic examination of reliance arrangements (2023 review, published 18 April 2024) found testing-related failings had risen from 46% of firms examined in 2019 to 70% in 2023, even under a mandatory testing regime.
• This consultation proposes removing the one hard, testable requirement- mandatory testing- in that exact area, on the back of the regulator's own evidence that compliance with it was deteriorating rather than improving.
• Unless the 'adequate steps' guidance is unusually clear and the Board holds itself to a high internal bar regardless of what is strictly mandated, this reform risks entrenching the weakness the JFSC's own examination just quantified, not correcting it.
• The appropriate institutional posture is to treat 'adequate steps' as at least as demanding as the testing regime it replaces, not as a lighter-touch alternative, until the Board has direct evidence otherwise from its own monitoring.

3. Detailed Proposals on the Reliance Framework

Context

• The reliance regime refers to the framework under Articles 16 and 16A of the MLO, including the conditions under which a supervised person may rely on identification measures applied by an obliged person (or an external person in a group reliance arrangement), as well as the associated Codes of Practice and guidance. Unlike the MLCO changes, none of the reliance provisions in the Amendment Order has yet come into force; all take effect from 31 October 2026, alongside the remaining MLCO provisions.
• The JFSC has also revised the structure of Section 5 of the Handbook and introduced new subheadings to improve navigability.
• Because Word's track changes rendering has limitations, the consultation paper notes that the full extent of these structural amendments isn't readily apparent in the marked-up version in Appendix 3.
• Firms reviewing the tracked document should be aware that the visible changes may understate the extent of the restructuring.

Reliance on the purpose and intended nature of the business relationship.

• A supervised person may now
• Place reliance on an obliged person in respect of information regarding the purpose and intended nature of the business relationship.
• The JFSC proposes additional wording to emphasise that
• the supervised person remains responsible for understanding its customer and their business activities.
• Relying on this information does not transfer that underlying responsibility.

Digital Identification (eKYC / Digital ID)

• The JFSC recognises the increasing use of Digital ID and eKYC providers and has provided guidance confirming that reliance may be placed on an obliged person that has used an eKYC provider to meet its own CDD obligations, provided all the conditions in Article 16 are satisfied.
• The JFSC has also clarified that reliance cannot be placed directly on an eKYC provider, as such providers are not themselves 'obliged persons' under the MLO.

Written assurance: taking 'adequate steps'

• With mandatory testing removed from the MLO (effective 31 October 2026), the Handbook will be updated to require supervised persons to evidence, through a new Code of Practice (COP53), that they have taken 'adequate steps'   based on an assessment of risk to ensure evidence of identity can be obtained promptly from an obliged person on request.
• Question 7: Does the guidance on taking 'adequate steps' provide sufficient clarity to support practical implementation?
• Written assurance remains required in all cases. Proposed guidance would help supervised persons determine whether written assurance alone is sufficient or whether additional measures are needed, informed by the risk assessment of the obliged person. Where the reliance arrangement is assessed as other than low risk, one or more additional risk-based measures may be required; the draft guidance includes worked examples.
• Question 8: Do you consider written assurance, supplemented by risk-based measures where appropriate, sufficient to demonstrate that 'adequate steps' have been taken?
• Amendments are also proposed to the Appendix C written assurance template itself, to modernise it and align it with the amended Articles 16 and 16A.
• Question 9: Do you agree with the proposed amendments to the Appendix C written assurance template?

Written assurance: seeking updated assurance

• A new MLO provision requires supervised persons to obtain updated written assurance at intervals they determine themselves, based on their knowledge of the customer, the customer's business, and the customer's risk profile.
• Proposed guidance would help supervised persons demonstrate compliance with this requirement.
• Question 10: Does the guidance on when to obtain new or updated written assurances provide sufficient clarity to support practical implementation?

Without delay   access to evidence of identity

• Revised guidance is proposed for the definition of 'without delay' in the context of reliance, under which periods longer than two working days are assessed on a case-by-case basis.
• The practical effect is that a period of more than five working days currently treated as not 'without delay’ could, depending on the circumstances, become acceptable.
• Question 11: Do you anticipate any operational challenges arising from the revised definition of 'without delay'?

Cessation of reliance

• Following the removal of mandatory testing, references to it are also removed from the Handbook.
• The circumstances in which reliance must cease are now specified directly in Articles 16(9A) and 16(9B) of the MLO, rather than being triggered by deficiencies identified through mandatory testing. COP55 explains that, following cessation of reliance on a given obliged person, a supervised person should review the appropriateness of continuing to rely on that obliged person for its other customer relationships, and provides guidance on this.
• Question 12: Is the guidance on the steps to be taken when reliance ceases sufficiently clear?

Group reliance: reflective changes

The JFSC proposes removing the two Codes of Practice relating to Group reliance, on the basis that they duplicate statutory provisions and add no independent content.

• Question 13: What additional guidance, if any, would be helpful in relation to Group reliance?
• Question 14: Considering the reliance proposals as a whole, do you agree with the proposed changes? Please provide reasons, including any practical benefits, risks, or unintended consequences.

4. Critical Analysis Strengths, Risks, and Challenges to Assumptions

What works well

• Genuine proportionality:
• Replacing a blanket mandatory-testing requirement with a risk-based 'adequate steps' standard mirrors the logic already applied to the MLCO reforms and is consistent with FATF's emphasis on proportionate, risk-based measures rather than one-size-fits-all rules.
• The digital ID/eKYC guidance
• Is a sensible, overdue acknowledgement of how due diligence is actually being performed in practice, and the boundary drawn reliance on the obliged person who used eKYC, not on the eKYC provider directly, keeps accountability with a regulated obliged person rather than an unregulated technology vendor.
• The periodic written-assurance refresh requirement
• Is, on balance, a strengthening of ongoing oversight compared with a static, one-off assurance obtained at the start of a relationship.
• This is easy to lose amid the deregulatory framing of the rest of the paper and is worth the Board noting as a genuine improvement, not just a cost.
• Tying cessation-of-reliance triggers directly to statute (Articles 16(9A)/(9B)) rather than to testing-deficiency findings
• Gives firms a clearer, more predictable basis for deciding when reliance must stop, rather than a triggering event that only existed as a byproduct of a testing programme firms ran themselves.
• Removing the two duplicative Group reliance Codes of Practice
• Is a genuine simplification with no apparent substantive loss, assuming the underlying statutory provisions are unchanged, worth a quick confirmatory check by legal/compliance rather than an assumption.

Hard truths and material weaknesses

• Removing mandatory testing aligns with the JFSC's supervisory work, which has flagged this area as weakening rather than improving.
• The JFSC's thematic examination feedback on reliance (issued 18 April 2024, covering a 2023 review of 10 supervised persons) found 29 findings across 7 of the 10 firms examined, an improvement on the 54 findings across 11 firms found in the 2019 examination overall.
• But on testing specifically, the trend runs the other way: the proportion of firms with a testing-related finding rose from 46% in 2019 to 70% in 2023. Within that 2023 cohort, 20% of firms had performed no testing of obliged persons at all, a further 30% had tested but not adequately, and one firm had paused testing three years earlier and had not resumed by the time of the examination.
• Mandatory testing was, for all its burden, the one bright-line requirement that forced reliance into a firm's monitoring programme, whether or not it was otherwise well integrated, and the JFSC's own most recent data shows compliance with that specific requirement deteriorating, not improving, in the years leading up to this consultation.
• Removing it now and replacing it with a judgement-based 'adequate steps' standard, without first closing the gap the regulator's own examination just identified, risks entrenching a weakness that was getting worse under the stricter regime.
• This should be raised directly in the firm's response to Question 8, not treated as a background risk.
• Both new standards   'adequate steps' and the case-by-case 'without delay' test trade a bright-line rule for a judgement call.
• A fixed testing cycle and a fixed five-working-day threshold were blunt, but they were also unambiguous on examination.
• Their replacements shift the burden from meeting a fixed standard to constructing and evidencing a risk-based justification every time, which may reduce cost for straightforward, low-risk arrangements but increase it for anything judged higher risk, and creates room for the JFSC and the firm to reasonably disagree after the fact about whether a given case was handled adequately.
• The reliance regime was singled out for scrutiny in Jersey's last FATF mutual evaluation, and independent commentary expects it to be a focus again in the next one.
• Loosening a testing requirement in an area already under international scrutiny carries the same optics risk flagged in the MLCO briefing: technically FATF-consistent on paper, but a target for adverse comment if MONEYVAL or FATF assessors conclude the changes have weakened practical oversight rather than merely modernised its form.
• The equivalent-jurisdictions list that industry asked for has been deferred rather than delivered.
• Firms that expected this consultation to establish a recognised allowlist of equivalent jurisdictions to simplify reliance on overseas obliged persons will not see that here.
• The Board should not build any planning assumption on an equivalent-jurisdiction list arriving alongside these reforms; if it matters to the firm's cross-border reliance arrangements, that needs to be raised as a live, separate ask, including directly in the response to Question 14, not assumed to be in train.
• The self-determined written-assurance refresh interval is a double-edged flexibility.
• Firms set their own refresh cycle "based on their knowledge of the customer, their business, and their risk profile," but that judgement will still need to be justified to the JFSC on examination.
• Too infrequent a cycle will look like avoidance of the spirit of the requirement; too frequent will add costs the reform was meant to reduce.
• This isn't a free efficiency gain; it is a new judgement call that needs its own documented rationale, sector by sector if the firm's book is mixed-risk.
• No details are available yet on the substance of the modernised Appendix C template (Question 9) beyond the stated intent to align it with the amended Articles 16 and 16A.
• The Board should ask compliance to review the marked-up Appendix 4 directly rather than approving a response to Question 9 on the strength of this summary alone.

Assumptions to challenge

• "Removing mandatory testing means less work"   
• For higher-risk reliance arrangements, evidencing 'adequate steps' on an ongoing basis, plus more frequent written-assurance refresh cycles, could equal or exceed the burden of a periodic testing programme; the saving is concentrated in low-risk, low-volume arrangements.
• "This is a separate, lower-stakes consultation half compared to MLCO"  
• In practice the two halves interact. A firm that both drops its MLCO (under Section 3 of the same paper) and loses its mandatory reliance-testing requirement (under this Section 4) is reducing oversight on two fronts of the same compliance framework simultaneously. The Board should look at the combined effect for any entity considering both, rather than reviewing the two halves in isolation.
• "The digital ID guidance solves our eKYC problem"
• It only permits indirect reliance, via an obliged person who has itself used eKYC;
• It does not
• Create a direct-reliance pathway onto eKYC/digital ID vendors, and
• Deliver the jurisdictional KYC utility that industry commentary suggests is the longer-term direction of travel.
• "Group reliance simplification is purely administrative"
• Is plausible but should be confirmed rather than assumed; removing a Code of Practice is a different act from removing a statutory obligation, and the Board should have legal confirmation there is no substantive narrowing hiding inside what is presented as tidy-up.

5. Practical Implications & Recommended Board Actions

Immediate (before 18 August)

• Map current reliance arrangements against the proposed 'adequate steps' standard now, rather than waiting for 31 October 2026, so any evidencing gaps are identified while there is still time to close them.
• Identify any current or planned reliance placed directly on an eKYC/digital ID provider, rather than on an obliged person who uses one, and flag these for restructuring; the proposed guidance does not permit direct reliance on eKYC providers.
• Decide, and minute, whether the firm is submitting a response to the reliance questions only or to the full paper (Questions 1–14), and confirm this decision is coordinated with the equivalent decision taken on the MLCO half, not made independently by a different team.
• Respond to the consultation, particularly Questions 8 (adequacy of 'adequate steps' plus written assurance), 11 (operational impact of the revised 'without delay' definition), and 14 (overall view). If the firm has a view on the deferred equivalent-jurisdictions list, raise it explicitly under Question 14, since there is no other mechanism to register it in this round.

Governance

• Do not treat 'adequate steps' as a lighter-touch replacement for mandatory testing internally, even though it is lighter-touch as a matter of law; hold the firm's own reliance monitoring to at least the same standard until there is direct evidence, from the firm's own examination experience, that a lower bar is safe.
• Where the firm is also considering MLCO non-appointment for any entity (see companion briefing), assess the combined effect on reliance oversight for that entity specifically, and record that combined assessment in board minutes.
• Set and document risk-based written-assurance refresh intervals now, with clear rationale by customer risk band, ahead of 31 October 2026.

Contracts & resourcing

• Review agreements with obliged persons and any eKYC/digital ID vendors used by them, to confirm the reliance chain matches the permitted structure (reliance on the obliged person, not the technology provider).
• Confirm with compliance whether current systems can evidence 'adequate steps' and support a self-determined written-assurance refresh cycle, or whether process or system changes are needed ahead of 31 October 2026.

Risk register

• Elevate "reliance governance embedding" as an active risk, independent of this consultation, given the JFSC's own prior review findings in this area.
• Add "mandatory testing removed before adequate-steps evidence base established" as a transition risk for the period around 31 October 2026.
• Add "combined MLCO non-appointment and reliance-testing removal" as a compounded risk for any entity where both reforms are being adopted simultaneously.

Cost/benefit

• Quantify current reliance-testing costs against the anticipated cost of an ongoing 'adequate steps' evidencing regime and more frequent written-assurance cycles; the net saving may be smaller than the headline removal of mandatory testing suggests, particularly for higher-risk books.

RISK WARNING

• This document is intended for board-level circulation and decision-making. It prioritises accuracy over completeness where primary sources leave gaps and flags every claim that could not be independently verified at the time of drafting rather than presenting it as settled.
• No commercial or political position is taken.
• This briefing should be read alongside the companion Comsure MLCO briefing, since both cover half of the same consultation and share a single response deadline.

Source URLs for Verification

Verification status as of 13 July 2026.

• Consultation page: https://www.jerseyfsc.org/industry/consultations/consultation-on-changes-to-the-reliance-and-money-laundering-compliance-officer-regimes/
• Full consultation PDF (primary source, Section 4   reliance framework): https://www.jerseyfsc.org/media/kq3hlfu3/changes-to-the-reliance-and-money-laundering-compliance-officer-regimes.pdf
• Amendment Order 2026 (Articles 16/16A changes): https://www.jerseylaw.je/laws/enacted/Pages/RO-077-2026.aspx
• JFSC thematic examination feedback: 'Feedback from our examination of supervised persons' reliance on obliged persons' (issued 18 April 2024): https://www.jerseyfsc.org/industry/examinations/examination-findings-and-questionnaires/feedback-from-our-examination-of-supervised-persons-reliance-on-obliged-persons/
• Drop-in sessions notice: https://www.jerseyfsc.org/news-and-events/drop-in-session-reliance-and-money-laundering-compliance-officer-regime-27-july/