A report says that Hong Kong faces an acute shortage of experts able to deal with the rising levels of regulatory and compliance challenges for the financial sector.

Hong Kong faces a severe shortage of financial compliance professionals even though there has been a big rise in the number of persons hired in this sector, the South China Morning Post quotes an international lawyer as saying.

“Globally, regulators are stepping up their investigations and enforcement activity, so companies and banks are enhancing their compliance regimes to meet this heightened scrutiny,” Kim Nemirow, a Hong Kong-based lawyer at Ropes & Gray, was quoted by the publication as saying. “Our Hong Kong office has four partners with deep experience in investigations. One year ago, we had one partner,” Nemirow said.

The report said that only only 50 investigators are assigned to the police anti-money laundering unit that faced a record amount of more than 37,000 potential cases last year. In the past three years, the report said that the number of suspicious transaction reports received by the unit has increased more than 80 per cent - from 20,287 reports in 2011 to 37,188 in 2014.

The report noted that Experis, the executive search arm of Manpower Group, said compliance staff levels in Hong Kong have increased 15 to 25 per cent in the past year. Throughout the whole of Asia, data from Robert Walters, the international recruiter, showed that advertising volume for jobs in legal and compliance functions rose by 10 per cent in the final three months of 2014 from the same period a year before. Accounting and finance job ad volumes rose 27 per cent in Asia. In Singapore, figures showed that job advertising volumes for compliance and legal jobs skyrocketed by 64 per cent in the final three months of 2014 from a year earlier. Robert Walters said there was an “acute talent crunch”.

"Professionals changing jobs can expect higher pay increases in mainland China, moderate pay increases in Hong Kong and nominal pay increases in Taiwan," global employment firm Michael Page said in its 2015 outlook on Greater China recently. It continued: “This is probably what we can expect in financial services and compliance as well.”

Employers in Hong Kong, the firm had said, expected an increase in their headcounts, with 51 per cent of them saying this; 6 per cent expect a drop and 43 per cent expect the level to remain the same.

The need for firms to sort out compliance problems is clear, given the sheer size of fines meted out to firms in recent months. Between 2008 and 2013, it is estimated by groups such as the UK-based CCP Research Foundation, for example, that large financial institutions have paid an estimated total of $200 billion in fines and related penalties for transgressions such as anti-money laundering control lapses, benchmark-rigging and mis-selling of financial services.

Last year, for example, even the jaded world of banking was stunned by the $8.97 billion fine imposed by US authorities on BNP Paribas for breaches of sanctions against blacklisted nations such as Sudan, Iran and Cuba. Most recently, US-listed Morgan Stanley reached a $2.6 billion settlement with US authorities over the sale of mortgage securities. JP Morgan and Bank of America have reached similar agreements; the legal wrangles stem from mortgage securities that went sour in the crisis in the US mortgage market of 2008.

Compliance costs are often cited by industry figures who speak to this publication as reasons for why cost/income ratios in wealth management often remain stubbornly above 70 per cent or often higher.