Hong Kong’s proposed Mandatory Reference Checking Scheme: the end of “rolling bad apples”?
Fai Hung Cheung
06 May 2021
The Hong Kong Monetary Authority (HKMA) released its consultation conclusions on the proposed Mandatory Reference Checking Scheme (MRC Scheme) on 3 May 2021.
It will apply to all authorised institutions (AIs) in respect of their Hong Kong business. It is intended that that the MRC Scheme will address the “rolling bad apples” phenomenon and will be an industry‑led initiative endorsed by the HKMA (as opposed to a supervisory requirement).
The MRC Scheme will be implemented in two separate phases. Phase 1 will require AIs to obtain references from current and former employers of applicants who are directors and bank employees in senior management positions and Phase 2 will extend the scope to applicants permitted to carry out regulated activities.
Timing for implementation has not been confirmed. To assist with the development and implementation of the MRC Scheme, the HKMA has requested that the Hong Kong Association of Banks (HKAB) set up an industry working group (IWG) to formulate operational details within six months from the date of the Consultation Conclusions. The IWG will also confirm the transition period for implementing Phase 1 – a period that will run from when the HKMA has endorsed the IWG operational plans.
This bulletin (which can be downloaded below) summarises the MRC Scheme requirements and identifies key practical challenges and considerations for AIs. In particular, we look at:
- When the obligation to obtain a reference arises
- Matters to be included in a reference
- How the information received should be used
- The obligation to update a reference
- Limiting liability
- Systems and controls
- Fairness and alignment with the Personal Data (Privacy) Ordinance
- The role of the Industry Working Group, set up specifically to assist with development and implementation of the MRC Scheme
- Immediate action points for AIs
Read our full bulletin for more detail.