ESRS G1 Business conduct

The role of the administrative, management and supervisory bodies (GOV-1)

The disclosure requirement for G1 GOV-1 can be found in chapter ESRS 2 GOV-1.

Description of the process to identify and assess material impacts, risks and opportunities (IRO-1)

The identification and assessment of material impacts, risks and opportunities in connection with aspects of business conduct took place along the entire value chain of VP Bank. The guidelines of the UN Global Compact and the Principles for Responsible Banking as well as national laws and regulations on due diligence in financial transactions were taken into account. Sound business practices and legal compliance are a fundamental prerequisite for the trust of VP Bank’s clients. As part of the double materiality analysis, the bank identified five areas as essential in the context of business conduct and highlighted their relevance along the value chain. The following table provides a comprehensive overview and specifies the most important directives and measures already taken for integration into business operations. This is intended to reduce (potential) negative impacts, actively manage risks and exploit opportunities.

As part of the periodic risk assessments and periodic internal controls, mitigation measures that contribute to the robustness of the bank’s defence mechanisms are also examined. The focus is on training, new processes or adjustments to due diligence and monitoring measures. Specifically, additional training for transaction monitoring was carried out in 2024, and concepts for closer monitoring of certain types of transactions were developed. In addition, adjustments to the Code of Conduct were made, which were also communicated to all employees by means of accompanying training measures. In the area of conduct risk, a new software solution was introduced to monitor aspects such as conflicts of interest and third-party banking transactions. The existing software solutions are regularly reviewed and adapted to the growing challenges by means of corresponding updates.

Business conduct policies and corporate culture (G1-1)

Corporate culture

Awareness of risk, security and compliance is important at VP Bank. A set of rules for mutually agreed directives and guidelines, as well as a group-wide Code of Conduct, provide guidance on the bank’s commitment as an economically, socially and ethically responsible employer and financial partner.

In order to embed the Code of Conduct, all employees pass annual mandatory, role-specific e-learning modules with a final knowledge test. In addition, all employees have a performance objective for ethics and compliance, according to which they are measured and assessed at the end of the financial year.

VP Bank’s Code of Conduct serves as an overarching behavioural compass and is communicated via e-learning as part of the onboarding of new employees. This training is mandatory for all permanent and temporary employees. Employees who only work at VP Bank for a limited period of time – such as trainees, graduates and apprentices – are also required to comply with the Code of Conduct and to demonstrate their understanding and application of it by completing an online assessment. This mandatory training is repeated every three years to ensure that the principles of behaviour, business conduct and interaction with stakeholders and society are aligned accordingly.

Group Compliance monitors the successful and timely completion of trainings on the Code of Conduct. Both non-participation and violations of the principles of behaviour described in the Code of Conduct may result in negative consequences depending on the level of severity. In addition to an entry in the personnel file and a negative performance appraisal, VP Bank reserves the right to take disciplinary measures against employees – up to and including termination of employment or criminal prosecution.

VP Bank also focuses on the three core values of “we achieve”, “we explore” and “we care”. Personnel practices such as recruitment, employee development, promotion, remuneration and performance appraisal are based on these values.

Leadership culture, based on six leadership principles, is a key factor in corporate culture. VP Bank promotes all employees to take on leadership responsibilities. Both the values and the leadership principles were developed collectively by numerous employees from different business units, regions and hierarchical levels and have correspondingly strong support. VP Bank strives to consistently align learning opportunities in the areas of leadership, behaviour and social skills as well as group-wide HR practices with these cultural cornerstones.

The business objectives and strategic priorities for the coming years require further development and a change of culture. In the summer of 2024, around 150 employees were interviewed in cross-departmental and cross-location focus groups, and around 35 members of key management were interviewed individually, in order to jointly devise what behaviour and mindset should be practised at VP Bank in the future. A compass was derived from the cultural vision showing the behavioural attributes that are intended to help all employees contribute to an attractive work culture.

Unlawful conduct and whistle-blowers

Corruption and bribery

VP Bank has a comprehensive set of rules for preventing corruption and bribery. These include the Code of Conduct of VP Bank, which is approved by the Board of Directors and brought to the attention of employees, as well as other operational measures that are regulated in the Group standard on conflicts of interest. VP Bank does not differentiate between employees who are more or less affected by corruption or bribery potential; it applies the same set of strict requirements to all employees.

Money laundering and terrorist financing (AML/CFT)

VP Bank has a comprehensive set of rules that defines the processes for preventing and detecting money laundering cases as well as possible terrorist financing. Employees are required to inform the local Compliance unit of any incidents that could be indicative of money laundering or terrorist financing. This is also taught in specialised training courses, which take place at least once a year.

VP Bank's due diligence procedures encompass the regulatory duties of care, which include the identification and verification of contracting parties and beneficial owners as well as the documentation in a business profile and the risk-adequate monitoring of business relationships.

These obligations are applied risk-based as part of the onboarding process, regular reviews, event-driven reviews and as part of the ongoing monitoring procedure, which is also reflected in the KYC processes, life cycle management, screening and transaction monitoring processes.

This means that roles in a business relationship are checked through Adverse Media and a comparison is made with World Check (PEPs, sanctions, etc.), counterparties to transactions are screened in real time against World Check lists that are relevant to sanctions or terrorist financing, and that transactions and their patterns are also checked. The processes are designed in such a way that they should intercept both internal and external factors and check indiscriminately whether a suspicion is directed against internal or external persons. If internal employees are affected by suspected cases, this would be coordinated via Group Legal and Group Internal Audit, and People & Culture would be involved due to the increased level of sensitivity.

Whistleblowing

VP Bank has a Group standard on whistleblowing. Potential whistleblowers can use both personal and written channels to submit their observations. For a detailed understanding of how whistleblowers can report potential suspicions and violations (anonymously), how and by whom these reports are processed and how whistleblowers are protected, please refer to Group standard GS-32, Whistleblowing, and the explanations in ESRS S-1. This Group standard is based on Directive (EU) 2019/1937, international standard ISO 37002:2021 on the establishment and operation of whistleblowing systems and the local legal and regulatory requirements of the subsidiaries.

Potential infringements and violations of the Code of Conduct and other directives are identified by anonymous or personal written or verbal reports from employees, managers, internal control bodies (Compliance, Internal Audit) or external control bodies (external, independent auditors). A violation is any case of employees failing to follow directives or not complying with instructions. This violates the duty of loyalty towards the employer. A violation may also consist of employees tolerating violations, obstructing the investigation of a suspected violation or discriminating against employees who have properly reported a violation.

Regardless of whether a suspicious activity report is initiated in person or anonymously, it is forwarded directly to the central whistleblowing unit (Group Internal Audit). Group Internal Audit decides on the scope and form of necessary investigations and clarifications. The relevant instances, procedures and processes are described in detail in Group standard GS-32, Whistleblowing.

Depending on the type of violation and the degree of fault, various sanctions are possible: a verbal reprimand, a written reprimand, a written warning or, in the case of very serious violations, termination of the employment relationship. The consequences of a verbal reprimand are at the discretion of the manager. There is no official written communication or immediate sanction. Written reprimands, warnings or dismissals are always filed in the personnel file and result in a downgrading of the performance appraisal and a reduction in variable compensation.

Sanctions that have been initiated or already implemented are assessed and confirmed in a first instance by Group Executive Management and then by the Board of Directors (NCC).

Prevention and detection of corruption and bribery (G1-3)

The results of inspections and investigations are brought to the attention of the relevant bodies such as Group Executive Management and the Board of Directors.

Corruption and bribery

The Group's Conflicts of Interest Policy governs the acceptance of gifts, third party accounts, outside employment and all other issues related to corruption and bribery. In addition, training courses on this topic, approximately two hours of training, are compulsory for all employees. These are carried out both at the start of employment with VP Bank Group and on a recurring basis. The course on the Group's Conflicts of Interest Standard checks that the learning content has been understood and that employees know where to find the information. Completion of the course and passing a final test is compulsory and monitored by an internal department. This serves to raise awareness and is supported by accompanying measures for reporting such observations to the responsible authorities.

The Board of Directors is informed once a year by the CRO about its obligations in connection with conflicts of interest (disclosure, reporting obligations, contact persons, deadlines). This information is also recorded in the minutes at meetings of the Board of Directors.

All VP Bank employees are required to annually confirm their compliance with the Code of Conduct and the relevant provisions of the Group Standard on Conflicts of Interest. These confirmations are checked for completeness and verified on a random basis (including by obtaining documents from third parties). Group Investment Compliance conducts checks to detect possible violations of the rules on corruption and bribery. These checks are carried out on the basis of information received, spot checks or anomalies, particularly in the case of transactions. In suspicious cases, Group Investment Compliance refers the matter to Group Internal Audit for an independent in-depth investigation. Group Internal Audit may conduct audits independently and autonomously as part of its risk analysis and audit planning. Group Internal Audit may also be involved in case-specific matters or conduct audits or investigations at the request or direction of the Board of Directors, for example. In doing so, Group Internal Audit acts independently of the Executive Committee and is formally accountable only to the Board of Directors.

Money laundering and terrorist financing (AML/CFT)

Internal regulations and directives implement the regulatory requirements that apply as a minimum standard within VP Bank. Of central importance in this regard is the structuring of due diligence obligations, which encompass the determination and verification of the identity of the contracting party, the determination and verification of the identity of the beneficial owner, the creation of a business profile as well as the risk-adequate monitoring of the business relationship.

VP Bank fulfils these obligations through risk-based onboarding, regular reviews, event-driven reviews and ongoing monitoring. This is also reflected in KYC processes, life cycle management, screening and transaction monitoring, and is supplemented by mandatory training. Effectiveness is monitored as part of the internal control system and through internal audit reviews.

In addition, all employees are required to annually certify compliance with applicable regulations, including those relating to the identification and treatment of suspected money laundering and terrorist financing.

Incidents of corruption or bribery (G1-4)

As part of the due diligence processes, which serve, among other things, to identify indications of money laundering, a predicate offence to money laundering, organised crime or terrorist financing, 130 cases of suspicion were identified groupwide, which resulted in a reporting obligation to the competent authorities. No cases of suspicion were confirmed during the reporting period. As a result, VP Bank was not subject to any regulatory or criminal fines in connection with corruption or bribery regulations.

Political influence and lobbying activities (G1-5)

VP Bank does not exercise any active political influence and is not involved in lobbying activities. However, through the bank’s membership in certain industry associations, there is an indirect possibility of it having influence in Liechtenstein due to its local market power. In Liechtenstein, VP Bank is a member of the Liechtenstein Bankers Association (LBV), the Liechtenstein Chamber of Commerce and Industry (LIHK) and the Liechtenstein Investment Fund Association (LAFV). The membership fees for these industry organisations amounted to CHF 647,798.

Membership contributions to other associations and organisations that exceed CHF 20,000 each amounted to CHF 162,078. These include memberships of Asia Society, Business Engine, the Luxembourg Bankers Association (ABBL), the Swiss Bankers Association and ETH Zurich. VP Bank does not consider these contributions to be relevant.