Chang Hwa Bank|Corporate Social Responsibility-Anti-Money Laundering and Countering Financing of Terrorism

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Anti-Money Laundering and Countering Financing of Terrorism

Commitment and Policy

The Bank is committed to safeguarding the integrity and stability of the financial system and to preventing money laundering and combating terrorist financing. Accordingly, the Bank has established a risk-based approach mechanism to effectively identify, assess, monitor, and mitigate money laundering and terrorist financing risks. The Bank continues to allocate sufficient manpower and resources to ensure the effective implementation of anti-money laundering and counter-terrorist financing (AML/CFT) measures.At the same time, to enhance employees' AML/CFT awareness and professional competence, the Bank offers a variety of in-person and digital training programs. Through education and awareness initiatives, the Bank instills sound AML/CFT concepts and practices, thereby preventing criminals from exploiting the Bank's financial products and services for money laundering and terrorist financing activities.
Policy and regulation related to anti-money laundering and countering financing of terrorism: "Anti-Money Laundering and Countering the Financing of Terrorism Policy", "Know Your Customer Policy", "International Sanctions Management Policy," "Directions Governing Anti-Money Laundering and Countering the Financing of Terrorism","Regulations on the Establishment of the Anti-Money Laundering and Counter-Terrorist Financing Management Task Force", "Guidelines for the Investigation of Client Fund Misappropriation by Financial Advisors" and "Statistics of Management Procedures of Anti-Money Laundering and Countering the Financing of Terrorism" of the Bank.
Sanctions Risk Control
In the process of providing financial services, the Bank strictly complies with sanctions regulations and counters terrorism financing and the proliferation of weapons of mass destruction (WMD). By collecting name lists and public information, or conducting internal due diligence, the Bank performs screening on customers and their related parties to prevent its business operations from being involved in terrorist financing and WMD proliferation activities. Furthermore, the Bank reminds customers to remain vigilant regarding whether their counterparties or goods are subject to sanctions measures. The Bank regularly updates its country risk list to manage geographical risks by continuously monitoring sanctions-related updates issued by the FATF, the United Nations, and authorities of major countries, as well as indexes such as country transparency and corruption perceptions. In response to global sanctions against Russia, the Bank promptly updates and issues relevant sanctions information to ensure that transactions do not violate sanctioned items. Adopting a risk-based approach, the Bank has established corresponding control mechanisms to effectively mitigate the risk of transactions violating sanctions.

Responsibilities

The Board of Directors has designated the Chief Compliance Officer as the head officer responsible for AML/CFT, with overall responsibility for overseeing the Bank's AML/CFT compliance. The Bank has established two independent dedicated units, AML/CFT Section I and AML/CFT Section II, under the Compliance Division, which are responsible for the implementation and oversight of the Bank's AML/CFT activities.
AML/CFT compliance activities include the development of AML-related policies and procedures and AML/CFT programs; ensuring compliance with applicable laws and regulations; planning and delivering training programs; reporting large value transactions; handling matters relating to suspicious transaction reporting and reporting requirements under the Counter-Terrorism Financing Act; and establishing and implementing policies for the identification, assessment, and monitoring of money laundering and terrorist financing risks. In addition, the Bank conducts investigations into conduct or transaction patterns indicative of the suspected misappropriation of customer funds by financial advisors.
The Bank regularly conducts money laundering risk assessments to identify, evaluate, and control money laundering and terrorism financing risks. Through continuous advocacy and training, the Bank enhances all staff's professional capabilities and risk prevention awareness to improve internal operating procedures and system mechanisms related to anti-money laundering and countering financing of terrorism.
The Bank's 2025 "Statement on Internal Control System for AML/CFT" was reviewed and approved at the 36th meeting of the 27th Board of Directors on March 27, 2026, and disclosed on the Bank's official website in accordance with regulations while announced on the website designated by the FSC.
Statement on Internal Control System for AML/CFT

Resources

Public-Private Collaboration: Signing the "MOU on Cooperation for the Anti-Fraud Project" and the "MOU on Cooperation for the Suspicious Transaction Analysis Mechanism"

To fortify fraud prevention efficiency and public awareness, the Bank signed a Memorandum of Understanding (MOU) on Cooperation for the Anti-Fraud Project with the Criminal Investigation Bureau of the National Police Agency, Ministry of the Interior, in March 2025. This strategic police-banking partnership enhances anti-fraud awareness campaigns and joint cybersecurity defenses, successfully elevating public vigilance and combating fraudulent activities.
To provide early warnings against the exploitation of financial accounts by fraud syndicates, dismantle illicit networks at their source, and safeguard individual assets, the Bank signed a Memorandum of Understanding (MOU) on Cooperation for Suspicious Transaction Analysis Mechanism with the Taiwan High Prosecutors Office in October 2025. Under this framework, the Bank will collaborate with the Taiwan High Prosecutors Office to develop advanced early warning and detection mechanisms. This will be achieved through the sharing of fraud and money laundering risk intelligence and trends, data collaboration, and feedback analysis to identify suspicious indicators and anomalous patterns, thereby enhancing both the timeliness and accuracy of suspicious transaction detection.

Continue to enhance the effectiveness of the Bank's AML/CFT operating systems

Since 2021, the Bank has implemented Robotic Process Automation (RPA) technology and has progressively expanded its scope of application each year. Initially applied to customer due diligence across different risk levels and transaction monitoring operations, RPA has since been extended to the automated generation of transaction details for individual customers, covering both periodic and ad hoc due diligence. This initiative has significantly reduced manpower and time requirements while greatly enhancing the efficiency of customer due diligence.
To address storage capacity constraints and information security vulnerabilities arising from both the surging volume of AML/CFT system data and the end-of-support status of database software, the Bank implemented the "AML System Disk Storage Equipment Procurement Project" in 2025. This initiative successfully resolved performance bottlenecks within the AML system, mitigated the risk of sensitive data leaks, reduced anomaly resolution time, and enhanced overall operational stability.

Relationship Manager Risk Dashboard:

The Bank continuously adjusts risk factors based on practical operations and integrates cross-system information to scientifically utilize quantitative data for cross-analysis of relationship manager behavioral risks. The Bank conducts ongoing monitoring through a systematic "Relationship Manager Risk Dashboard" and implements tiered management based on the results of risk indicators. We intensify the review of wealth management-related reports and trading activities for high-risk relationship managers to implement risk prevention mechanisms, identify any irregularities or improprieties, and detect and report them early. This ensures regulatory compliance and the effective management of potential risks.

The Bank provides employees with AML/CFT education training courses in forms of in person lectures, digital lessons, video courses, etc., in order to strengthen the professional knowledge and skills of the Bank's personnel at all levels in AML/CFT. In 2025, the Bank held education and training related courses with a total of 23 classes and a total of 16,077 people participated in the training.

Assessments

The Bank regularly provides an evaluation report on its AML/CFT risks fort he Board of Directors and senior executives to understand the Bank's AML/CFT risks. Continue to adjust the Bank wide comprehensive money laundering and terrorism risk assessment methodology.

The Bank's 2025 "Comprehensive Risk Assessment Report on AML/CFT" and the "AML/CFT Plan and Risk Prevention Improvement Measures" will be submitted to the Financial Supervisory Commission for review after approval by the Board of Directors.

Management Unit AML/CFT Implementation Status: Reports include newly amended business procedures or standard operating procedures (SOPs) in line with internal and external regulatory changes, risk assessment results, improvement of deficiencies identified in the audit, education and training, transaction monitoring and management, and declaration of suspicious transaction cases. Reports are submitted to the AML/ CFT Management Team at least semi-annually and to the Board of Directors and Audit Committee semi annually.
The Bank has incorporated "Money Laundering Control Act" and "Counter-Terrorism Financing Act," related laws & regulations and the Bank's internal regulations into the Bank's implementation of compliance. Compliance self-assessment is conducted every half year, by taking written tests and audit sampling to make sure relevant personnel's comprehensive understanding in laws & regulations and compliance status of operational procedures.
The Bank's Internal Auditing Division incorporates the Bank's AML/CFT implementation and related measures (implementation status and operating procedures are included), internal audits are conducted on a regular basis, and test the Bank's AML/CFT plan for its efficiency and quality of business and risk management quality. Each year, auditing accountants are commissioned to conduct project audits.