Hong Kong Is Closing the Rolling Bad Apples Loophole

On 1 July 2026, Hong Kong's Mandatory Reference Checking Scheme quietly crossed a line it hadn't crossed before: it now connects the banking and insurance sectors. A candidate can no longer leave a misconduct record behind by switching industries. The regulators call the people it targets "rolling bad apples" — and the loophole they're closing is the job change itself.

If you hire anyone in or adjacent to Hong Kong financial services, this is the third expansion of a regime that keeps getting wider. Here's the whole arc, and who it touches now.

What the scheme actually does

The Mandatory Reference Checking Scheme (MRC) forces a recruiting institution to obtain conduct-related reference information on a prospective hire — covering the previous seven years — from the person's former employers, through a common protocol using standardised templates. Not a friendly phone call. A structured, mandatory exchange of conduct history.

The point is simple. For years, someone disciplined for misconduct at one firm could resign quietly, join a competitor, and start clean. The reference never revealed it. The MRC removes that escape hatch.

Three phases, each one wider

The regime didn't arrive all at once. It has expanded deliberately:

- **Phase 1 (May 2023)** covered roughly 3,500 senior staff — directors, chief executives, and other approved senior positions at authorised institutions. - **Phase 2 (30 September 2025)** widened the net to around 50,000 staff, including people licensed or registered for securities, insurance, or Mandatory Provident Fund regulated activities. - **Phase 3A (1 July 2026)** made it cross-sector. Insurance entities and authorised institutions that are also licensed insurance agencies must now run reference checks when appointing individual insurance intermediaries in long-term insurance business — sharing conduct information across the banking and insurance schemes.

Each phase kept the seven-year look-back and the standardised-template method. What changed was reach.

Phase 3B is already on the horizon

Phase 3A isn't the finish line. The HKMA and the Insurance Authority will review how implementation goes at the end of 2026, and use what they learn to shape Phase 3B — which is set to extend coverage to the remaining individuals within the existing banking and insurance reference-checking schemes. In other words: if you're not in scope today, plan as if you might be next year.

Why this matters even if you're not a bank

Most HR managers reading this don't run a bank. Two reasons to pay attention anyway.

First, scope is broader than "banks." If your company employs anyone registered for securities, insurance, or MPF-regulated activities — an in-house treasury desk, a corporate insurance function, staff seconded into a licensed entity — some of your hires may already sit inside this regime. Check before you assume you're exempt.

Second, this is where the direction of travel shows. Hong Kong has decided that conduct history should follow a person across employers, by law, in the industries where the stakes are highest. Regulators elsewhere in APAC are watching. Conduct verification is becoming an expectation, not a nice-to-have — and the reference check is being treated as a serious control, not a formality.

What to do this quarter

If any part of your headcount could be in scope: map which roles are regulated, confirm whether your firm is a recruiting institution under the scheme, and make sure whoever handles hiring for those roles knows the standardised-template process — and the seven-year window — before the next offer goes out. Internal moves into regulated roles count too, so don't scope this to external hires only.

And if you're outside financial services entirely, take the principle, not the paperwork: a reference check is only useful when it's structured, consistent, and asks about conduct — not when it's a rushed call the day before a start date. Our take on why résumé claims so often go unverified sits right next to this one, and our Structured Interview Scorecard helps you apply the same rigour earlier in the process — before the reference stage ever arrives.