Rising regulations push Hong Kong trust costs higher

Firms turn to RegTech as compliance burdens grow alongside private wealth opportunities.

As Hong Kong’s trust industry expands, so too does the burden of compliance. According to a joint survey by the Hong Kong Trustees’ Association (HKTA) and KPMG, nearly two-thirds of firms have seen compliance costs rise between 5% and 15% in the past year, driven largely by mounting regulatory complexity.

“Indeed, in recent years, there has been a wave of compliance requirements. It's understandable, because to maintain Hong Kong as an IFC, we have to keep the regulatory framework and integrity market to the highest standards,” said Ka Shi Lau, Chairman of the Hong Kong Trustees’ Association.

Lau pointed to a growing list of new regulations, such as rules governing trustees’ monitoring of public funds for investor protection, along with expanding reporting demands like client money rules and securities rules. “Robust compliance requires infrastructure, for example, systems for customer due diligence, transaction monitoring as well as the reporting,” she said.

Vivian Chui, Head of Securities and Asset Management, Hong Kong at KPMG China, noted that regulatory tightening is an unavoidable tradeoff for maintaining Hong Kong’s global standing. “It is always the Hong Kong Government's intention to make Hong Kong competitive and maintain its position as the IFC, unfortunately, unavoidably, this will have caused implications from a compliance perspective,” Chui said.

To address rising costs, firms are increasingly investing in technology. “Hot topics are 
adoption of AI technology while everyone is talking about this and use of RegTech solutions to automate certain compliance tasks and increase the scope of monitoring,” Chui said. She cited surveys showing that RegTech adoption can potentially save “40% of the cost when it comes to things like KYC know your plan procedures.”

Lau agreed that RegTech remains a long-term solution. “In the longer term, adoption or RegTech solutions will reduce costs and be even more efficient in compliance,” she said. She also emphasised the need for firms to build agile compliance programs tailored to their size, business activities, and product complexity.

Despite compliance challenges, Asia’s private wealth sector continues to present major opportunities. “The rise of new wealthy individuals across Asia, and also the increasing intergeneration transfer of wealth” are fueling demand for succession planning and wealth preservation tools, Lau said.