A newly-released survey finds that bank onboarding for would-be clients remains painful in Hong Kong, raising the risk that the jurisdiction could lose out.

A regular issue that comes up for wealth management professionals is the risk that understandably tough checks for taking on new clients can become so onerous that a customer walks away and switches to riskier options.

For example, your correspondent has heard it said on numerous occasions that it can take up to an average of two months to take a client on board because of the need to do the necessary KYC checks, go through reams of paperwork and other information. The onboarding challenge has prompted a number of firms, such as Zurich-headquartered Appway for example, to develop systems to reduce the pain of onboarding (for an article on this topic, see here).

A sense of how large a problem onboarding remains came from a survey, issued yesterday, from the Hong Kong Institute of Chartered Secretaries. It recently surveyed its members who are involved in opening bank accounts in Hong Kong. What it found is not pretty reading.

The survey, run from from 28 July to 19 August, and drawing 434 responses, found that 98 per cent of the respondents thought that companies had difficulty opening bank accounts in Hong Kong. It also showed that 79 per cent of respondents thought there was a serious or somewhat serious problem.

"It is of utmost importance that Hong Kong does not lose out on its competitiveness or the ease of doing business to other jurisdictions and all stakeholders must work together to jealously preserve these strongholds of Hong Kong," said Ivan Tam, president of HKICS.

Some 72 (17 per cent) of those surveyed pointed out that while they could not open the bank account in Hong Kong, they were able to do so in another jurisdiction with the same bank. This suggests that rival financial centres could tempt business away from Hong Kong.

Strikingly, some 49 per cent of respondents felt the stringent anti-money laundering and counter-financing of terrorism requirements were being used to keep away less revenue generating customers.

The institute hopes that such data might encourage authorities to come up with "constructive solutions" as to how to make AML and other checks as smooth as possible so that Hong Kong banks do not lose out to those in rival jurisdictions.

The survey said this is a global, not a specifically Asian, problem. Global, local and Chinese banks were cited, indicating that the problem of account opening is prevalent and not isolated to a few banks. The top eight banks mentioned were HSBC, Standard Chartered Bank, Hang Seng Bank, Bank of China, DBS, Bank of East Asia, Citibank and ICBC.

This concern about the duration of onboarding processes is a long-standing one. Back in 2011, it was reported that wealth management firms are missing opportunities to deepen client relationships and increase revenue during the account onboarding cycle, according to the July report, Wealth Management Onboarding: Expanding beyond Account Opening, from Boston-based Aite Group. That report found that more than 70 per cent of wealth management firms surveyed view client onboarding as either a back-office function that needs to be cost-contained or a front-office automation tool; only 30 per cent view client onboarding as a competitive differentiator.

The last point is important - banks that can show their onboarding is efficient without compromising on compliance can gain an edge by showing their seriousness.

Clearly, there can be no compromise on standards when it comes to ensuring banks take on clean money. Rigorous onboarding, however, should not be so painful that the very value of banking becomes seriously degraded, encouraging people to try riskier business models instead. As always, regulators and, dare one say, politicians need to remember the Law of Unintended Consequences.