Hong Kong's 25 largest accounting firms 2014

Due or undue diligence?

Hong Kong’s Anti-money Laundering and Terrorist Financing Ordinance and related legislation, which has recently come to be effective, has boldly redefined accountability in the banking and finance industry of what is arguably Asia’s financial centre. The industry is still largely stumped over what the new legislations may imply for practitioners and firms, and whether those implications are justified. Key requirements of the AMLO, such as more rigid customer due diligence, and the required reporting to suspicious transactions or customers, have wide ranging implications for financial firms – issues that are, in general, difficult to distill.

For many practitioners and financial firms, the expansion of accountability for money laundering and terrorist financing crimes is one of the central controversies surrounding the law. Whereas previously, complacency was not equated with complicity, AMLO now extends the responsibility of deterring money laundering to financial institutions. Although many find this extension of accountability worrying, some believe that this level of accountability has already existed even before AMLO.

“Regulators and legislators are now reminding the financial industry that they are fiduciary institutions,” says Martin Muirhead, Senior Advisor for Financial Crime at PwC Consulting Hong Kong.

Technical challenges are also a key consideration. Some professionals believe that the AMLO does little to draw the lines by virtue of the fact that the criminal activity is loosely defined. “Money Laundering and Terrorist Funding are very difficult to describe and identify, and Hong Kong-related laws are not much help because they are written so wide such that individuals or organizations can potentially be held criminally liable for involving themselves in activities that are commonly regarded as legitimate,” states Paul Phenix, Consultant at Baker Tilly Hong Kong. Given AMLO’s many pragmatic considerations, a key challenge is the concern over how to reform compliance departments. “The increased regulatory scrutiny means the overall cost of compliance is boosting up. The biggest challenge so far has been in the sourcing of the right candidates and personnel to fill the expected compliance structure,” shares Manhim Yu, Partner at Fraud Investigation & Dispute Services, EY Hong Kong.

Lastly, Client Care may also be compromised in favour of compliance. “There is a potential friction between financial institutions and customers due to increased regulatory scrutiny. Clients may feel more ‘controlled’ and inconvenienced because of rigid regulatory requirements regarding due diligence,” says Yu.

Who made it to HKB’s list?

PwC emerged as Hong Kong’s largest accounting firm for 2014 and broke last year’s tie with Deloitte Touche Tohmatsu. PwC’s total employment reached 3,500 this year but a spokesperson clarified that the 2,400 figure provided to HKB last year was only referring to its Assurance staff. To boost its employment, PWC has launched last September its 2014/15 Graduate Recruitment campaign with career talks hosted in campuses in Mainland China and Hong Kong. Around 2,000 places were on offer for suitable candidates in various PwC offices across Mainland China and Hong Kong for September and October.

On the other hand, Deloitte’s total staff dropped 4% to 2300. All in all, the total employment of Hong Kong’s 25 largest accounting firms jumped by 10% to 14,343.