2017 Compliance Update – Q1 Overview

David Richardson Compliance, Market update

In our last article we focused on how compliance is perceived within a business and how the Asian market has historically seen this function as a ‘tick-box’ exercise. In this edition we are focusing on 4 areas where we have seen a change during the first quarter of 2017.

Private Bank/Wealth Management

Despite the fact that the banking margins have been low and competition is fierce for many private banks in Asia, most bankers continue to show optimism towards the market. As some of the banks exit Asia, this creates great opportunities to some of the remaining banks as there is a lot less pressure on the cost side. Interesting results from an EY survey indicate that 39% of firms in the region said compliance will be their top priority, comparing to 11% of Europeans and 8% of North American firms. Banks will try to avoid costly compliance failings by hiring more staff and continue expansions of their KYC/AML teams. Growing belief amongst industry insiders is that compliance needs to be understood as an attitude and a culture, not just as a departmental function. AML and Products/ Suitability experts will continue to be in high demand in Q1 and Q2 2017 so as a result, compliance will continue to be the main focus of their strategic budget for 2017.

Asset & Investment Managers/Hedge Funds

Some fund managers are looking to apply for the license and expand their presence in China whereas some firms are still cautious and not rushing to follow suit. Under the license, asset managers are required to launch a product within six months after registration. If not, their private securities fund licence will be suspended. Fidelity has obtained the first ‘private fund’ licence in China and UBS Asset Management is expected to follow in due course. Although it isn’t always an immediate requirement, candidates at VP or Director level are often asked if they have experience in the China market. This usually means that hiring managers expect their fund managers to expand into China at some point. For investment compliance roles, hiring managers are open to Equities or Fixed Income compliance professionals from investment banks.

Investment Banks

Hiring into investment banks looks to hold steady in 2017. With a number of the global banks continuing to migrate their functions to outside of Hong Kong, such as India, Philippines, Malaysia and China, there will be less junior to mid-level roles and more focus on senior hires for 2017. Within product advisory compliance (such as Equities or Fixed Income Compliance) a majority of hires will mostly be replacement headcounts. We have also noticed that there has been a recent internal movement of IBD compliance professionals moving to regulatory compliance teams.

In Hong Kong, increasing regulatory requirements are resulting in more focus on how the latest technology can be harnessed to enhance regulation and regulatory compliance, also known as “regtech”. As a number of regulatory projects are being undertaken based in China/Hong Kong, there is an increased need for language fluency in Mandarin or Cantonese. Compliance professionals with tech backgrounds and language skills will be in high demand over the coming months.


The Hong Kong Government has recently taken action against misleading Hong Kong life insurance companies who are promoting their products via social media in mainland China. This has resulted in a number of new regulatory actions being rolled out since April 2016 to the second half of this year to protect both mainland China and policyholders in Hong Kong. It was noted by CIRC that Hong Kong has little regulation in place so insurance companies must ensure that they are following correct protocol. This includes ensuring all products that were sold before April 1 are to be provided with an annual update to all policyholders on the return projection.

The insurance authority will need to hire experts in the region to assist with this matter but the only available channel for recruitment is to directly headhunt from compliance professionals who are currently working within other insurance firms. It is ironic how a regulator now requires to headhunt staff from insurance firms. There will definitely be tighter rules set in place as the regulations will enhance protection to the policyholders from the mainland and Hong Kong. It would be important to crack down on any miss-selling to encourage more mainlanders to buy financial products in Hong Kong.