Hong Kong Banking and Insurance Sectors Tackle Misconduct via Cross-Sector Checks

⦿ Executive Snapshot

What: Hong Kong's banking and insurance sectors are implementing a cross-sector reference checking arrangement to address misconduct in financial professionals.
Who: Hong Kong Monetary Authority (HKMA) and Insurance Authority (IA).
Why it matters: This initiative aims to mitigate the risks associated with professionals concealing past misconduct, enhancing the integrity of the financial services sector.

The Mandatory Reference Checking Scheme for the banking sector was introduced in May 2023 and expanded in September 2025.
The insurance sector launched its reference checking scheme in September 2024, broadening its scope in early 2026.
Phase 3A of the cross-sector arrangement will commence on July 1, 2026, requiring reference checks for individual insurance intermediaries.
Standardized templates will be used to request conduct-related reference information from the past seven years.
Banks must respond to reference requests within one month, while insurance entities must respond within 15 calendar days.

The initiative addresses the “rolling bad apples” phenomenon, where financial professionals move between sectors without disclosing past misconduct.
Both sectors have operated independent reference checking frameworks, which are now being integrated for more comprehensive oversight.

Immediate consequences include enhanced scrutiny of financial professionals during transitions between sectors, potentially reducing instances of misconduct.
Long-term implications may lead to a cultural shift in the financial services industry towards greater accountability and transparency.

Potential risks include regulatory compliance challenges for institutions in implementing the new procedures effectively.
There may be concerns regarding the reliability and completeness of conduct records accessible across sectors.

Implementation of Phase 3A on July 1, 2026, will be a critical milestone for assessing the effectiveness of the arrangement.
The review of the implementation at the end of 2026 will inform the development of Phase 3B, potentially expanding the scope of reference checks further.