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Hong Kong: Mandatory Reference Checking (MRC) Scheme

Tired of bad apples spoiling the financial bunch? Hong Kong's Mandatory Reference Checking Scheme (MRC) has got your back. Read how this scheme ensures banks get the full picture of potential hires, weeding out the rotten ones and building trust in the system.
A symbolic bank building and a machine with MRC written on it. Silver coins with symbols of Hong Kong, dollar and candidate are there.

Have you heard the saying “one rotten (or bad) apple spoils the barrel”? Here, it’s the job applicant who covers up his/her past misconduct to get a new job. This can become a nightmare in a place like banking, where trust is paramount. That’s where the HKMA MRC steps in to protect the system, ensuring that bad apples don’t ruin the bunch.

So, what’s HKMA MRC?

  • Hong Kong Monetary Authority (HKMA): Hong Kong’s central banking institution
  • Mandatory Reference Check (MRC): A standard procedure whereby potential employers confirm the details provided by job applicants by reaching out to their former employers.
 

Background & Implementation Timeline

Identifying The Issue

The Hong Kong Monetary Authority (HKMA) identified a critical issue within the banking industry - the "rolling bad apples" phenomenon. This occurs when individuals who engage in misconduct at one bank simply move to another without disclosing it. This could potentially lead to the misconduct being repeated at the new institution, posing a risk to the financial system.

2020
2020 - 2021

Proposed Solution

To address this challenge, the HKMA initiated a consultation with the banking industry. They proposed a framework for Authorised Institutions (AIs) to share reference information bilaterally during the recruitment process for specific positions. In May 2021, they issued a Consultation Conclusions Paper outlining a refined Mandatory Reference Checking Scheme based on industry input. This paper established core principles and parameters for the MRC Scheme and entrusted a joint industry working group (IWG), led by the Hong Kong Association of Banks (HKAB), to develop operational details in collaboration with the HKMA.

Implementation

Building on the industry's collaborative efforts, the HKMA endorsed the final guidelines developed by the HKAB and the DTC Association in May 2022. Authorised Institutions (AIs) began implementing the MRC Scheme by May 2023, fostering a more transparent and accountable recruitment process within Hong Kong banking institutions.

May 2022 - May 2023

 

Phase 1 (May 2022 – Present)

Launched in May 2023, Phase 1 focuses on MRC for specific positions (Leadership and Key Personnel) within Authorised Institutions (AIs) as defined under the Banking Ordinance and regulations for Insurance, Mandatory Provident Fund (MPF), and Securities activities.

Roles on which MRC Phase 1 implemented:

Banking Ordinance (BO):

  • Directors approved under Section 71
  • Chief Executives (CEs) and Alternative Chief Executives (ACEs) approved under Section 71
  • Managers appointed under Section 72B
  • Executive Officers approved under Section 71C

Insurance Ordinance (IO): Responsible Officers approved under Section 64ZE

Mandatory Provident Fund Schemes Ordinance (MPFSO): Responsible Officers approved under Section 34W

 

Phase 2 (Future – Anticipated Mid 2025)

Building on the success of Phase 1, Phase 2 of the Mandatory Reference Checking Scheme (MRC) is anticipated for mid-2025. This expansion further strengthens the integrity and ethical practices within Hong Kong’s banking institutions.

MRC Phase 2 will be implemented on the following roles (Post – Mid 2025)

  • Roles to those already covered under Phase 1
  • Staff Licensed to carry out the following activities:
    • Securities-related activities under the Securities and Futures Ordinance (SFO)
    • Insurance-related activities Technical Representatives (TRs) licensed under Sections 64Y or 64ZC of the Insurance Ordinance (IO)
    • Related activities under the MPFSO (i.e. subsidiary intermediaries registered with the MPFA under §34U(4) of the MPFSO);
  • Client-facing staff who provide advisory services or receive certain types of performance-based remuneration.
 

Information “Reference Providing AIs” Should Provide to “Recruiting AIs” in the MRC Scheme

The MRC outlines specific details that “reference providing AIs” (previous employers) are expected to share with “recruiting AIs” (potential employers) during the reference check process. 

Focus on Material or Serious Issues: The information provided should be significant and relevant to the candidate’s fitness and propriety for the new role. 

Here’s a breakdown of the potential information categories:

  • Breaches of Regulations: This includes violations of the Banking Ordinance (BO), Insurance Ordinance (IO), Mandatory Provident Fund Schemes Ordinance (MPFSO), and Securities and Futures Ordinance (SFO).
  • Integrity Concerns: This covers incidents raising serious doubts about the candidate’s honesty, integrity, or similar ethical concerns.
  • Misconduct Reports: This includes reports filed with the HKMA or other relevant authorities regarding the candidate’s conduct (regulatory breaches or potential criminal activities).
  • Disciplinary Actions: This encompasses internal disciplinary actions taken by the previous employer (e.g., warnings, fines, suspension, dismissal) and external disciplinary actions taken by regulatory bodies or professional associations.
  • Additional Relevant Information: This broader category may include any other significant misconduct incidents that occurred within a specified timeframe, either before or after the reference request.

Objective: The goal of this information sharing is to provide “recruiting AIs” with a comprehensive picture of the candidate’s professional conduct, allowing them to make informed hiring decisions that contribute to a more ethical and responsible banking institution.

 

Impact of MRC on Employers and Candidates

Employers:

  • Standardised Process: The MRC eliminates guesswork by establishing a clear and consistent framework for conducting background checks within the entire banking industry. In addition, this simplifies the process, minimises administrative burdens, and ensures all candidates are evaluated on a level playing field.
  • Enhanced Risk Management: By providing a more in-depth picture of a candidate’s past conduct, the MRC helps employers make informed hiring decisions. Furthermore, this can lead to fewer instances of misconduct within the organisation, ultimately reducing errors and financial losses.
  • Reputational Advantage: Implementing the MRC demonstrates a commitment to ethical practices and responsible hiring. This can attract and retain top talent, further enhancing the organisation’s reputation within the industry.
  • Increased Due Diligence: The MRC mandates reference checks for key positions like directors, CEOs, and certain managerial roles. This extra layer of due diligence allows employers to make well-informed decisions when appointing individuals who will significantly impact the organisation’s direction.

 Candidates:

  • Increased Transparency: The MRC fosters transparency by requiring candidates to provide consent for reference checks. This allows for a more open and honest background verification process.
  • More Rigorous Screening: Candidates can expect a more thorough background check. It’s essential to ensure their past conduct aligns with the high ethical standards expected within Hong Kong’s banking industry.
Overall, the mandatory reference checking scheme signifies a positive development for Hong Kong’s banking institutions. By strengthening transparency and accountability, the MRC fosters a more robust and trustworthy financial system, ultimately benefiting both institutions and individuals alike.
 
 

Building a Stronger Hong Kong Banking System, Together!

As a key player in the background screening industry, CheckMinistry is well-positioned to support Authorised Institutions (AIs) in effectively implementing the Mandatory Reference Checking (MRC) scheme.

We offer a 3-day turnaround on comprehensive background checks, empowering Authorised Institutions (AIs) to make informed hiring decisions quickly. Our team’s deep understanding of the MRC and local regulations ensures a compliant process, while our dedicated local support guides you every step of the way.

 

 

Ready to build a stronger, more ethical banking system? 

Schedule a discovery call with a CheckMinistry verification expert to simplify your MRC journey.

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