JFSC and its 25%, 10% & 1% tests for verification of significant influence or control and HEIGHTENED RISK

Relevant laws and/or the JFSC require supervised entities to verify controllers of 25%, 10%, and 1% of all the issued class shares with HEIGHTENED RISKS to disclose the information to the JFSC REGISTRY.

The following provides some further guidance on the JFSC requirements.

The JFSC says:-

• One of the requirements under the Financial Services (Disclosure and Provision of Information) (Jersey) Law 2020 (the DPI Law) and FINANCIAL SERVICES (DISCLOSURE AND PROVISION OF INFORMATION) (JERSEY) ORDER 2020, ARTICLE 5 Information to be provided in annual confirmation statement, is that a relevant entity:-
  • MUST VERIFY THE NAME AND ADDRESS of each member WHO HOLDS 1% OR MORE (in nominal value or number, as applicable) of all the issued class shares.
  • And it is within the JFSC REGISTRY SUPERVISORY TEAMS VISITS remit to require the relevant entity to AUTHENTICATE THOSE DETAILS in any manner it reasonably determines.
• However, to align the DPI Law’s 1% or more membership authentication threshold with that set out in the JFSC AML/CFT/CPF Handbook, as well as global norms set by the Financial Action Task Force, THE JFSC REGISTRY upon incorporation will not require authentication of information or documents for
  • Members of a relevant entity who hold 25% or less (in nominal value or number, as applicable) of all the issued shares of a class.
  • The reason is that it is generally accepted that individuals with 25% OR LESS SHAREHOLDING, voting or appointment rights are unlikely to have significant influence or control over an entity.
• However, THE JFSC says this 25% or less exemption WILL NOT apply in the following two scenarios:-
  • Where the relevant entity is Administered by a regulated service provider:-
    • https://www.jerseyfsc.org/industry/guidance-and-policy/beneficial-ownership-and-controller-guidance/
  • Where the relevant entity is Considered to carry an associated HEIGHTENED RISK
    • [See 4.2, page 8 https://www.jerseyfsc.org/media/8148/registry-supervision-inspection-programme-q4-2024.pdf ] 

Further to the above, No.1 - where a regulated service provider administers the relevant entity, the following must be considered:-

• The JFSC apply the FATF standards regarding beneficial ownership and control. To this end, corporate and legal entities registered in Jersey may use a
• Upon incorporation = use a general threshold of 10% OR MORE and
• Upon a change of beneficial ownership and control = 25% OR MORE
• Further to providing the two percentages [25/10%], the JFSC does say percentages are not set thresholds, and a case-by-case risk assessment is required, as required by the JFSC AML/CFT/CPF Handbook.
• Furthermore, the JFSC say the risk assessment must be based on the whole/complete relationship. For example,
• Upon a change of beneficial ownership, where a regulated service provider views a 20% beneficial owner as HIGH RISK,
• The regulated service provider should consider registering the beneficial owner on the central register even though its interest is LESS THAN THE 25% THRESHOLD.

Further to the above, No.2 - the JFSC says HEIGHTENED RISK indicators may include (but are not limited to):

1. The relevant entity being connected to a HIGH-RISK JURISDICTION
   1. HIGH-RISK JURISDICTION means (as per 6.2.2 AML/CTF/CPF handbook):- The risk that a business relationship is tainted by funds that are the proceeds of criminal conduct or instrumentalities or are used to finance terrorism or the financing of proliferation, is increased where the business relationship or one-off transaction is with a person or entity connected with:
      • An enhanced risk state (see Appendix D1 of this Handbook). Currently, March 2025 – Iran, the Democratic People’s Republic of Korea, and Myanmar (Burma)
        • https://www.jerseyfsc.org/industry/financial-crime/amlcftcpf-handbooks/appendix-d1-countries-and-territories-for-which-a-fatf-call-for-action-applies/
      • A sanctioned country or territory (see Appendix D2 of this Handbook, sources 6 and 12 therein);
        • This means, at any time, a country or territory which is itself, or whose government (or equivalent) is, the subject of any sanctions broadly prohibiting dealings with such government (or equivalent), country or territory, including trade sanctions, arms embargoes and other trade restrictions in force in Jersey (refer to Sources 6 and 12 of Appendix D2 of this Handbook for a current list of sanctioned countries and territories).
          1. Source 6 = a Jersey-sanctioned country or territory
          2. Source 12 = Jersey Arms embargo, trade sanctions and other trade restrictions
      • A sanctioned “designated” person (Means a person or entity listed on the sanctions designations lists under the Jersey sanctions regime)
   2. When assessing country risk for AML/CFT/CPF purposes, in addition to considering the features of a customer, it will be relevant to take into account the number of occasions that a particular country, territory, or area is listed for different reasons (3.3.4.2)
      • Beneficial ownership and/or control, or any of the relevant minority shareholders, is/are associated or connected to a HIGH-RISK JURISDICTION (based on the test above)
2. Any PEP or PEP connections as part of the structure
3. The activity of the relevant entity is sensitive and captured in either table of THE JFSC SOUND BUSINESS PRACTICE POLICY
4. Credible intelligence THE JFSC receive from a variety of sources indicates that the relevant entity is exposed to other high-risks

SOURCE

• https://www.jerseyfsc.org/news-and-events/read-our-q4-2024-registry-supervision-inspection-programme-feedback/
• https://www.jerseyfsc.org/media/8148/registry-supervision-inspection-programme-q4-2024.pdf