Yep - it's a Z-order issue. I'm guessing that the hand and body are all part of one layer? So you might want to separate those in the PSD/AI so the arm and hand are clearly a layer above or below the body.
Check this segment from the recent live show where I show this with a character in order to set him up for walking:
(Face palm) That makes perfect sense! I will take him apart and stack his parts appropriately.