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Hong Kong: Authorised establishments to implement the brand new Necessary Reference Checking Scheme by Might 2023

On 5 Might 2022, the Hong Kong Financial Authority (HKMA) introduced its endorsement of the Pointers on the Necessary Reference Checking Scheme (respectively, Pointers and MRC Scheme) issued by the Hong Kong Affiliation of Banks and the DTC Affiliation – only one 12 months after issuing the Session Conclusions Paper (lined in our earlier bulletin).

The MRC Scheme has been launched as an effort to curb the “rolling dangerous apples” phenomenon within the banking sector in Hong Kong, by enhancing the disclosure of the employment historical past of potential workers taking over regulated roles amongst authorised establishments (AIs). The MRC Scheme might be launched in two phases, and AIs are given 12 months (ie. as much as 2 Might 2023) to place in place the mandatory inner controls, insurance policies and procedures, for the implementation of Part 1 of the MRC Scheme (Part 1).

Scope of Part 1

Part 1 covers the next senior administration positions inside AIs in Hong Kong:

  • administrators, chief executives and alternate chief executives authorized below part 71 of the Banking Ordinance (BO);
  • managers notified to the HKMA below part 72B of the BO;
  • govt officers authorized below part 71C of the BO; and
  • accountable officers authorized below the Necessary Provident Fund Schemes Ordinance and the Insurance coverage Ordinance.

Abstract of the MRC Scheme

An AI recruiting a job candidate throughout the scope of the MRC Scheme (Recruiting AI) ought to first receive written consent (within the type of the template annexed to the Pointers) from the job candidate for the employment reference checking. It ought to then request the previous and present employers of the candidate (restricted to AIs solely) for employment references masking the previous seven years. In flip, an AI that receives the employment reference request (Reference Offering AI) ought to make the required disclosures inside one month of receiving the request from the Recruiting AI.

The Recruiting AI can request additional info inside 15 working days of the receipt of the employment reference, which must be given by the Reference Offering AI inside one other 15 working days.

A job candidate ought to usually be given the chance to be heard by the Recruiting AI, particularly if the employment reference incorporates unfavorable info. The Recruiting AI ought to then consider all info obtained to make the employment determination.

Employment info to be disclosed within the reference

A Reference Offering AI ought to present info on the related job candidate’s earlier employment information over the previous seven years, together with:

  • the candidate’s full identify and date of beginning;
  • whether or not the candidate’s employment had been or would have been terminated on account of a misconduct matter (ie. a breach of authorized or regulatory necessities, an incident which forged severe doubts on the candidate’s honesty and integrity, a misconduct report filed with the HKMA, or inner or exterior disciplinary actions arising from conduct issues);
  • whether or not the candidate is the topic of an ongoing inner investigation in relation to a misconduct matter (topic to concerns similar to secrecy, privilege, business affect, and many others.)1; and
  • different info, together with every other misconduct issues or ongoing investigations that are deemed severe or materials in nature however didn’t end in (or wouldn’t have resulted in) the termination of the candidate’s employment (additionally topic to comparable concerns above).

The knowledge offered by the Reference Offering AI must be true, truthful, full and able to substantiation (though the supporting paperwork should not required to be offered to the Recruiting AI), and may comply with the type of the MRC Info Template annexed to the Pointers.

The place are difficulties prone to come up for AIs?

For Recruiting AIs, there are prone to be two key challenges:

  • firstly, deciding whether or not to onboard a candidate pending (and conditional upon) the outcomes of the employment reference, or to carry off on onboarding till the outcomes are obtained. If the candidate is onboarded and the employment reference will not be passable, the Recruiting AI might then must terminate his/her employment. Nevertheless, if the onboarding is delayed till a passable employment reference is obtained, that might imply a delay of 1 to 2 months in onboarding, and probably the lack of the candidate to a different position within the meantime; and
  • secondly, the way to assess any unsatisfactory info within the employment reference. The Pointers clarify that this can be a matter of discretion for the Recruiting AI. Nevertheless, if the Recruiting AI decides to proceed with the employment and the candidate engages in additional misconduct, the choice to make use of the candidate could also be thought-about by a regulator in assessing the Recruiting AI’s method to recruitment. As defined within the Pointers, Recruiting AIs ought to doc the explanations for hiring a candidate about whom unfavorable or inconclusive info is obtained.

For Reference Offering AIs, a number of challenges can even come up:

  • the Pointers have left room for interpretation on the extent of element that must be disclosed within the employment reference and the diploma of cheap evaluation that must be made by Reference Offering AIs. The Reference Offering AI might want to decide how a lot info to offer, realizing that any unfavorable info might result in the candidate not with the ability to take up new employment; and
  • making an allowance for that the reference interval is seven years, Reference Offering AIs will want to consider whether or not they have enough info to answer requests that return a number of years, and specifically in circumstances the place an worker might have left employment as a part of a mutually agreed separation or by resignation to keep away from being terminated. This is a vital consideration as a result of Query 8 of the MRC Info Template requires the Reference Offering AI to verify whether or not the candidate’s employment would possible have been terminated if that they had not resigned or left employment earlier than termination was attainable.

Subsequent steps

Whereas most AIs will have already got in place inner controls and procedures on employment references, inner investigation, doc retention and information safety and confidentiality, AIs ought to acquire a radical understanding of the Pointers, with a view to figuring out any gaps inside their current methods and making any adjustments wanted to implement Part 1 in Might 2023, in keeping with the necessities of the Pointers. Specifically, AIs might want to be certain that they’ve applicable methods in place for responding to reference requests that they obtain.

Part 1 might be reviewed after two years (i.e. in round mid-2025), and the method and preparations for Part 2 of the MRC Scheme – which has a much wider protection than Part 1 – could also be refined earlier than its launch.


1 If the Reference Offering AI opts to not disclose any ongoing inner investigation within the employment reference, it will likely be below an obligation to offer an replace to the Requesting AI (offered that the candidate stays employed by the Requesting AI on the time) if:

the investigation completes inside 12 months from the request for the employment reference; and
the investigation concludes that the candidate’s employment with the Reference Offering AI would have been terminated.
If the Reference Offering AI discloses any ongoing inner investigation within the employment, the Requesting AI might request for an replace on a quarterly foundation for as much as 12 months following the employment reference request.

Ben Harris

Ellie Cheung

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