Cathay FHC has set up a "Corporate Sustainability Committee" under the board of directors and has set up a "Sustainable Governance Working Group" to promote corporate governance matters such as integrity management, anti-corruption, anti-bribery and compliance with the group, and report to the board of directors every six months. The Administrative Office of Cathay FHC set “Policy and Code of Operation Integrity”, and the formulation, amendment, or repeal of this policy and code shall be subject to the approval of the board. The board of directors has made great efforts to ensure that the integrity management policies are implemented. Furthermore, in order to improve the integrity of the company, the auditing unit shall incorporate the compliance with this code into the scope of the investigation and report to the board on a regular basis the lack of improvement.

 

Cathay FHC shall conduct business activities in a fair and honest manner. Before the business dealings, Cathay FHC shall take into account the legality and credibility of the commercial objects. It shall avoid trading with the record of dishonesty and sign with others contract should contain integrity terms. The directors shall uphold the high degree of self-discipline and shall, when they have an interest in their own motions, should explain the important contents of their own interests when the board of directors is concerned. If the directors are interested in the interests of Cathay FHC, they shall not be included in the discussion and voting, and shall be avoided when discussing and voting, and shall not act on behalf of other directors to exercise their voting rights. For more detailed information: Cathy Financial Holdings Policy and Code of Operation Integrity

 

Cathay held training courses related to business integrity in 2019 in order to implement business integrity and ethical conduct (such as annual training courses regarding the Code of Conduct for Employees and compliance for newcomers), which amounted to a total of 1,026 hours with 664 participants.

 

Furthermore, Cathay FHC established the Code of Conduct for Reporting Illegal, Unethical or Dishonest Cases, which establishes reporting channels, specifies procedures for handling cases, and protects the legal rights of the involved parties. The Regulations also specify that the identity of all involved parties, including the whistleblower and investigation personnel, shall remain confidential and be protected to prevent unfair treatment or retaliation. We were not involved in any immoral or unethical conduct in 2019.

 

Preventing Insider Trading

Cathay FHC submits “Notes on Reporting of Insider's Equity Change in the Company” when the insiders such as directors, managers and others take office to comply with it, so as to avoid violations or occurrences of insider transactions. In addition, Cathay FHC also files the "Director's Manual" and the "Compliance Brochure for Directors and Supervisors of TWSE/TPEx-Listed and Emerging Market Companies", "Directions of Securities Market Regulatory for the TWSE/TPEx-Listed company and its directors, supervisors and major shareholders" and "Compliance Brochure for Independent Directors" and other information which are compiled by the Taiwan Stock Exchange Corporation when the Directors take office to assist Directors in understanding the laws and regulations related to securities transactions and listing rules and other relevant reporting matters and legal responsibilities.

 

In addition, in order to standardize the procedures of disclosure and management mechanisms of Cathay FHC and its subsidiaries’ material information, Cathay FHC established “Guidelines/Regulations of Disclosure of Cathay FHC and its subsidiaries’ Material Information ”and “Regulations of Press Conferences Concerning Material Information of Cathay FHC and its subsidiaries” by referring to the“ Taiwan Stock Exchange Corporation Procedures for Verification and Disclosure of Material Information of Companies with Listed Securities”. Through disclosing those rules mentioned above in the rules and regulations zone of Cathay FHC’s internal website, personnel throughout all levels of the Company can enquiry at any time, so as to avoid violating or occurring insider trading.

 

Cathay FHC also has stipulated “Policy and Code of Operation Integrity”, “Procedures and Guidelines of Integrity Management Operation”, “Code of Ethics” and “Code of Conduct of Employees”, all of which contain the relevant provisions of “Prohibition of Insider Trading”. Cathay FHC holds educational trainings annually for directors, managers, and employees on the "Code of Integrity, Ethics, and Conduct," and the 2019 training has been completed in December, 2019:

For understanding and complying Cathay FHC’s "Policy and Code of Operation Integrity", " Procedures and Guidelines of Integrity Management Operation" and "Code of Ethics", the Company submits those rules and policies to the Directors, and publishes on the internal educational training platform for employees to check at any time. Besides to the prohibition of insider trading, the educations and trainings include the contents and cases of anti-money laundering, prohibition of getting gifts and hospitality, participation in public affairs, political contributions, etc.

 


Cathay FHC has closely followed the changes to the global financial and regulatory environments for years, and strengthened compliance management and culture continuously, to ensure that all operations comply with the regulation. The group’s compliance and AML/CFT is managed as a whole on the group-level, and implemented by level and region. The Chief Compliance Officer holding concurrent post as the Chief AML Compliance Officer appointed by the Board of Directors is in charge of the management of group compliance, as well as semiannual reports on compliance implementation to the Board of Directors and Audit Committee in 2019. Subsidiaries and second-tier subsidiaries (including overseas) have the same management framework based on their industry laws, management requirements, and scale.

Systematic Management of Compliance Risks

In response to the supervisory trends and to strengthen internal control, we convened a total of 4 group-level Compliance Committee meetings in 2019. We supervised major subsidiaries in establishing a quantified compliance risk assessment mechanism based on characteristics of operational risks in the current phase. We will continue to review implementation results in hopes of optimizing our compliance governance system. We also keep researching global supervisory trends to promote the globalization of group compliance. We planned a digital platform for group-level compliance, and are looking into the use of new technologies to link the management mechanisms of subsidiaries, in order to enhance information sharing.

We established a regulation amendment management system to know well and transmit the latest development of regulation immediately. Depending on the level of risk, we implement different management measures that take into consideration both control and efficiency, so that we can respond to the requirements of the competent authority and stay in touch with global supervisory trends rapidly and properly. We conducted a total of 13 compliance inspections overseas in 2019 to determine the compliance performance through on-site inspection procedures and strengthened the compliance governance of domestic and overseas units through two-way interactions.

Cathay FHC implements a corporate culture of integrity and transparency and promote sound operations by establishing the whistleblower system. We have taken protection measures to encourage whistleblowers to voice out. The whistleblowing mailbox received 7 reports from internal whistleblowers and 1 report from an external whistleblower in 2019. Investigation reports were completed for all cases and all cases were closed without finding any illegal activities.

We are also studying domestic and overseas anti-corruption and anti-bribery laws and international trends, including the key points and compliance risks of the US Foreign Corrupt Practices Act (FCPA), and issues related to the domestic Commercial Bribery Prevention Act and Draft Whistleblower Protection Act. Besides promoting the laws and trends to raise employee awareness of anti-corruption and anti-bribery, we were invited by other organizations to share our research results.

Furthermore, we established the External Compliance Incident Reporting and Management Guidelines for the effective supervision of our subsidiaries. The Guidelines contain risk warning indicators applicable to major violations of the law and downgrading by the financial authority, and establishes reporting procedures for the Board of Directors and managers to rapidly obtain warning information, evaluate, and take improvement measures in response to the group's compliance risks. We also established mechanisms for reviewing penalties imposed on our competitors and the group, and we established group-level and subsidiary-level review standards to monitor the latest changes in supervision and compliance self-inspections.

 

Compliance Training Courses of Cathay FHC and its Five Major Subsidiaries

We arranged a wide range of compliance education and training sessions for different subjects in 2019 in response to the Group’s developments and regulatory trends. The sessions took the forms of case sharing, movie appreciation, and group discussions, and covered basic knowledge, including financial supervision, information security, and digital technology.

 


Developing AML/CFT Mechanisms

Cathay FHC established the AML/CFT Management Guidelines, group-level risk methodologies, risk factors, and important internal control mechanisms, as well as risk warning mechanisms and monitoring indicators, in response to international AML/CFT trends and domestic and overseas supervision requirements. Cathay FHC and all of its subsidiaries continue to develop AML/CFT systems by adopting the risk-based approach; we have also included relevant SOPs in the categories of self-inspection and internal audit, and enhanced customer due diligence and continuous monitoring measures in terms of high risks.

We convened a total of 4 group-level AML/CFT meetings in 2019. The meetings mainly promoted and improved the group-level AML/CFT management system and implementation results, optimized the group-level AML/CFT standard operations, and strengthened information sharing and cross-business risk management by subsidiaries. We will continue to keep pace with the times and improve our AML/CFT management performance in coordination with Taiwan’s APG Report published in October 2019, financial supervision, and actual implementation status. The Group began to step up the application of technologies and big data in 2016 through external technologies and internal R&D. We took the lead in promoting and looking into the use of new technologies, such as RPA, AI, and big data analytics, to improve the Group's AML/CFT performance.

 

Enhance AML/CFT Data Sharing and Management Mechanisms

We referenced FATF recommendations and the practices of the Bankers Association of the Republic of China, and established group-level information sharing regulations and platform, so as to improve the synergistic effects of group-level management. There are numerous types of information that are shared to achieve sharing and collective learning of technical knowledge and risk warnings. Types of information include group-level lists, types of suspicious transactions, information on suspicious customers/transactions, and exchange of risk data between subsidiaries. We hope to deploy a group-wide defense network through these efforts. We continued to carry out periodic reviews and optimization, improve information sharing results, and strengthen cross-business risk management between subsidiaries in 2019 to improve overall AML/CFT results at the group-level.


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