I tried to set up the controller to do a backup to a local server. When checked from a local machine, logging in via cygwin to the sftp server works perfectly fine.

In the controller I get a message about it not being able to reach the machine.

Logs state: "[https-jsse-nio-8043-exec-6] [] c.t.s.o.b.c.c.a.f(): Fail to connect to SFTP server"

Creds are fine, doesn't matter if the user is jailed or not. I've seen a similar post, where ownership was an issue - it's not the case here.

An example when I set up a jailed account:

sftp user@192.168.1.123

user@192.168.1.123's password:

Connected to 192.168.1.123.
sftp> put test.x
Uploading test.x to /test.x
dest open "/test.x": Permission denied           <---- perfectly fine, as it's jailed
sftp> cd backup                                              <---- getting to the directory where user has W permissions
sftp> put test.x
Uploading test.x to /backup/test.x
test.x                                                                                                    100%    4     1.0KB/s   00:00
sftp>

So no issues whatsoever - I can connect, I can upload, yet controller experiences some issues and isn't really willing to elaborate on what's the problem.
It doesn't even browse the remote directory at all.