Driving better examination outcomes: insights from the Jersey Compliance Officers Association update

At a recent event hosted by the Jersey Compliance Officers Association (JCOA), Lee Sabiston, Director of Heightened Risk and Examinations at the Jersey Financial Services Commission (JFSC), shared updates on the JFSC’s evolving approach to examinations, the assessment of seriousness, and the role of the Heightened Risk Response (HRR) team. These themes are central to our supervisory strategy and reflect the JFSC's commitment to supporting businesses in achieving sustainable compliance.

This blog summarises the key messages from that session, including common findings from recent financial crime examinations, enhancements to the JFSC's examinations reporting methodology, and practical guidance for firms preparing for remediation.

Common findings from financial crime examinations

The JFSC’s 2024 financial crime examinations have highlighted several recurring areas for improvement:

• business risk assessments (BRA): boards must be actively involved in the BRA process, with clear documentation of discussions and approvals. BRAs should be tailored to the specific risks faced by the business, not generic templates. Inadequate consideration of terrorist financing and proliferation financing risks remains an area for improvement.
• risk appetite: firms must ensure their documented risk appetite aligns with actual business practices. Aspirational statements such as claiming zero tolerance for financial crime while servicing high-risk clients can undermine credibility. Our handbook offers helpful guidance for reviewing risk appetite.
• compliance monitoring plans (CMPs): CMPs should be risk-based, with sufficient focus on systems and controls designed to manage a firm’s top risks. The JFSC’s recent compliance monitoring thematic feedback paper provides further insights.
• source of funds and wealth: this remains a priority area. The JFSC have observed gaps in the adequacy of records, verification, and ongoing updates, issues that will continue to be a focus in future examinations.
• periodic reviews: some firms are not conducting reviews in line with their own risk-based frameworks, and actions taken to prevent or address backlogs have been considered inadequate in some cases.

Preparing for a successful examination

Preparing for an examination should be an ongoing process. The JFSC encourages industry to:

• self-assess regularly: benchmark against legal and regulatory requirements
• use available resources: leverage JFSC updates, webinars, and feedback papers
• be organised: a well-prepared business instils confidence in examiners that compliance is being taken seriously
• report breaches early: self-identifying breaches and outlining remediation plans can reduce the scope of an examination
• engage thoughtfully: provide considered responses, ask for clarification when needed, and support answers with data and documentation where possible
• be open and transparent: where the JFSC has confidence in the messages received, it can be less intrusive in its work. Examinations are as much about gaining positive assurance as they are about identifying non-compliance.

A new approach to examination reporting

In the first half of 2025, the JFSC has been trialling a revised examination report format to improve clarity and usability. Key changes include:

• streamlined content: less legal quoting, more focus on findings and implications
• clear test objectives: each finding outlines what was being assessed, what was observed, and why it matters
• risk-focused analysis: the JFSC explains the risk posed by non-compliance, not just the breach itself
• risk ratings: findings are rated (minor, moderate, major) to help businesses prioritise remediation and understand potential seriousness

This new format also enhances internal consistency and data quality, enabling more informed regulatory decisions.

Assessing seriousness: a risk-based framework

The seriousness of an examination outcome is assessed based on the potential risk to the JFSC’s guiding principles. The findings and other relevant factors are considered, such as:

• customer base: high-risk customers increase the inherent risk of deficiencies
• regulatory history: previous regulatory action may suggest deeper cultural or ongoing issues
• repeat findings: indicate previous remediation has been ineffective and unsustainable
• systemic weaknesses: widespread issues are more concerning than isolated ones

Where potentially serious outcomes are identified, the JFSC may engage the HRR team and/or refer the case to Enforcement for further investigation.

The role of the heightened risk response team

The HRR team performs defined activities to deliver effective risk-based supervision where serious deficiencies or regulatory concerns have been identified. While fewer than 5% of examinations result in HRR referrals, the team plays a critical role in:

• applying enhanced scrutiny and oversight of remediation plans
• supporting sustainable compliance improvements

Building sustainable remediation

Effective remediation requires more than fixing immediate issues. Key considerations include:

• root cause analysis: understand why the issue occurred
• realistic timelines: don’t underestimate the time required
• systemic thinking: address broader issues, not just issues identified on files reviewed
• balanced resourcing: avoid compromising ongoing compliance for remediation
• sustainability: ensure fixes are long-term, not temporary

The JFSC’s 2023 guidance on remediation action plans remains a valuable resource for businesses.

Looking ahead

The JFSC remains committed to supporting industry through clear guidance and open dialogue. In the coming months, businesses can expect:

• a feedback paper from the Financial Crime Examination Unit (FCEU)
• updated guidance on the new report format
• a “quick wins” document highlighting common, easily fixable issues
• guidance on how the JFSC assesses seriousness

The JFSC welcomes feedback and suggestions on these initiatives.