Phase 2 of the MRC Scheme to be launched in September 2025

In July 2025, the Hong Kong Monetary Authority ("HKMA") issued a circular announcing the launch of Phase 2 of the Mandatory Reference Checking ("MRC") Scheme, effective from 30 September 2025.

Introduced in May 2022, the MRC Scheme aims to combat the "rolling bad apples" phenomenon, where individuals with a history of misconduct move between institutions without disclosing their past behaviour.  This poses reputational, operational and financial risks to new employers and undermines public confidence in the financial sector.

Under the MRC Scheme, authorised institutions ("AIs") regulated by the HKMA must request conduct-related information from the current and former AI employers of a prospective employee applying for certain positions, covering up to seven years prior to the application.  Reportable information includes breaches of legal or regulatory requirements, concerns about honesty or integrity, misconduct reports filed with the HKMA, disciplinary actions and ongoing internal investigations.  Reference-providing AIs are expected to respond within one month using a standardised template.

Phase 1 of the MRC Scheme applied to senior roles, including:

• directors, chief executives, alternate chief executives and executive officers approved under the Banking Ordinance

• managers notified to the HKMA under the Banking Ordinance

• responsible officers approved by the Insurance Authority under the Insurance Ordinance or the Mandatory Provident Fund Schemes Authority under the Mandatory Provident Fund Schemes Ordinance

Phase 2 significantly broadens the scope of the MRC Scheme to include staff licensed or registered to carry out securities related, insurance related or other regulated activities under the Securities and Futures Ordinance, the Insurance Ordinance or the Mandatory Provident Fund Schemes Ordinance.

What should AIs do to prepare?

To ensure readiness and compliance, AIs should take proactive steps ahead of the Phase 2 rollout, including the following:

• Review and update recruitment policies to incorporate MRC requirements for newly in-scope roles.

• Communicate changes internally, especially to HR teams and hiring managers, to ensure alignment and awareness.

• Assess and address data privacy implications, including how personal data will be collected and processed under the MRC Scheme.

• Train relevant staff on the operational procedures and obligations associated with MRC requests and responses.

• Establish internal protocols for responding to MRC requests within the required timeframe, using the standard template.

By taking these steps, AIs can help ensure a smooth transition into Phase 2 and reinforce industry-wide efforts to promote accountability and integrity in the financial sector.