Compliance and Risk Control:
Our Commitment to Prudent Operation

To effectively prevent and resolve major risks, we have implemented comprehensive risk management and coordinated planning, while continuously improving our risk management practices. We attach great importance to anti-corruption and have established a comprehensive supervision system as well as a sound anti-corruption system to strictly crack down on all kinds of corruption issues and behaviors that violate business ethics. With the support of a rigorous supervision system, a sound auditing mechanism, as well as continuous cross-checks through employee code of conduct reviews and special inspections on fund utilisation, we are able to achieve a full supervision coverage of all employees at least once every three years to ensure that they adhere to integrity, honesty, and ethical business practices.

Comprehensive Risk Management

We have created a strategic framework for risk management, which serves as the basis for establishing a comprehensive risk management system that covers five key areas: organisation, policies, processes, technology, and culture. In addition, we have planned out three implementation stages in a systematic manner.

Risk Management Model

We have established a risk management organisation structure based on “Four layers and Three lines”. We have also developed a comprehensive risk management model that involves “centralised management by head office departments + institutionalised management by subsidiaries”.

“Four layers and Three lines” of Risk Management Model

 

 

 

Institutional Framework for Risk Management

Our institutional framework for risk management follows a layered approach and is guided by risk preferences. It includes comprehensive risk management guidelines, risk identification and evaluation system, and special risk management rules and operation rules, in an aim to specify the management requirements, maintain the standards, methodology and process of risk management, and enhance the application and effectiveness of the system.

Technical Systems

We have established an intelligent risk management platform that enables us to achieve a unified visualisation of risks, unified credit extension, risk preferences, early risk warning and special risk management. This platform provides robust support for managing different types of risks, and allows us to conduct in-depth analysis and application of risk information, thereby improving the accuracy of our risk analysis and enabling proactive risk management.

Anti-corruption and Business Ethics

We strictly adhere to the laws and regulations of the countries and regions in which we operate, including the Oversight Law, Anti-Money Laundering Law, and Anti-Unfair Competition Law of the People's Republic of China. This is to prevent corruption and unethical behavior such as bribery, extortion, fraud, money laundering, and unfair competition.

Building a Comprehensive Supervision System

We have established a comprehensive supervision system that is led by disciplinary inspection and supervision. This system coordinates various types of supervision, including regulatory supervision, functional supervision, special supervision, and public supervision. We have also developed a complete, closely-knit work mechanism that involves consultation, research, collaborative rectification, problem clue transfer, and warning notification, so as to enhance the systemic, continuous, and effective internal supervision.

 

 

Disciplinary Inspection and Supervision

We have an internal disciplinary and inspection mechanism in place to promote clean governance and combat corruption. This mechanism supervises and inspects the performance of duties, impartiality, integrity, and moral conduct of managers and all employees in accordance with the law. It investigates illegal and criminal activities such as embezzlement, bribery, abuse of power, rent-seeking, tunneling, and favoritism. Violators of the law will be punished accordingly, and managers who fail to fulfill their duties or demonstrate dereliction of duty will be held accountable. Those suspected of crimes will have their cases transferred to the prosecutor’s office for investigation and prosecution. We also provide suggestions to the organisation of the relevant personnel for improving their regulatory systems and mechanisms.

In 2022, a total of 298 cases were filed and 327 people were held accountable throughout the system. Among them, serious violations of discipline and law, such as those committed by Wu Xuewen, Lin Zhengyue, and Zhu Yanchen, were jointly investigated and dealt with by local supervisory agencies. Breakthroughs were made in investigating corruption cases of top executives in subsidiary companies, non-financial fields, and “fleeing resignation” cases, as well as urging corrupt individuals to hand themselves in voluntarily.

Disciplinary inspection and supervision agencies adhere to the established regulations for dealing with clues and materials related to disciplinary violations or illegal activities. They provide suggestions for handling relevant issues and categorise the received clues for proper processing. If evidence of disciplinary violations or illegal activities is found that requires investigation for disciplinary or legal responsibility, the agency files a case and collects evidence in accordance with regulations. Following the completion of the investigation, an internal review is carried out, and the agency proposes suggestions for approval and implementation based on specified limits of authority and procedures.

We have established an internal inspection and supervision institution. The inspection institution at the headquarters sets up inspection teams on a regular basis to monitor the compliance and performance of senior management personnel in both the headquarters departments and subsidiaries. The primary focus of these inspections is to identify issues such as abuse of power for personal gain, embezzlement, bribery, and corruption. Typically, all departments and subsidiaries receive a full inspection every five years.

To institutionalise and standardise anti-corruption efforts, we have compiled various anti-corruption systems involving fundamental regulations, guiding principles, and work standards, creating a rigorous institutional framework. In 2022, we made improvements to 19 anti-corruption systems, including the petition reporting and integrity filing systems, compiled five tool manuals, and achieved full coverage of the business process from petition reporting acceptance to case filing. We formulated and published CITIC Limited Anti-Corruption Code of Conduct , which is based on strict adherence to the Prevention of Bribery Ordinance of Hong Kong. The code specifies key areas such as bribery and embezzlement, abuse of power and company assets, conflicts of interest, and procurement and bidding procedures, with clear punitive measures for its violations.

Audit Supervision

The company strictly adheres to laws and regulations such as the Corporate Governance Code of the Hong Kong Stock Exchange, and actively promotes the construction of the internal audit system. The Audit and Risk Committee is established under the Board of Directors, and audit agencies are set up in the headquarters and important subsidiaries with about 600 audit personnel. Upholding the principle of “Thorough and Rigorous Auditing”, the audit agencies at all levels independently supervise the company’s risk management and internal control, aiming to assist the company in improving its management, achieving development goals, and fully leveraging the crucial role of internal audit in the corporate governance and supervision system.

The company has implemented a number of internal audit systems, including the Internal Audit Regulations, Management Regulations for Internal Audit Agencies of Subsidiaries, and Code of Ethics for Internal Audit Personnel . The headquarters’ audit agency reports to the Audit and Risk Committee on a quarterly basis regarding system-wide audit activities, audit findings and rectification, as well as internal audit personnel resources. Furthermore, an annual evaluation of internal audit work is conducted to assess subsidiary audit management, audit quality, audit performance, communication and coordination, and to provide specific guidance and suggestions.

Strengthening Overseas Compliance Operations to Guard Against Integrity Risks

In 2022, we undertook a specialised study to enhance our compliance operations overseas, which has yielded significant advancements in mitigating integrity risks in our foreign investments and operations.

Integrity education

We place a high value on anti-corruption training for everyone involved in our organisation. This includes the board of directors, management, as well as all employees, including third-party staffing. We educate our staff on the importance of maintaining good behavior standards and moral norms by offering warning education conferences, integrity education lectures, business training sessions, and integrity education videos, as well as reporting typical cases of violations of discipline, law and dereliction of duty. Our aim is to actively guide the entire company towards building a solid defense against corruption by creating a culture where it is impossible, unthinkable, and unacceptable to engage in corrupt practices.

In 2022, the company’s headquarters released a number of online courses on integrity and compliance training via the internal learning platform and procured books on anti-corruption and clean governance policies for its staff. In addition to these efforts, the headquarters also continued to carry out integrity education in various forms.

CITIC Bank has offered nearly 60,000 compliance training sessions and over 6,000 inspection visits at all levels throughout its organisation. They distributed articles on regulatory environment, policy interpretations, and experience sharing through their corporate WeChat account.

CITIC Securities has rolled out anti-commercial bribery and integrity policies, established a sound commitment system for integrity practice, and offered multiple online training sessions on integrity operations covering over 20,000 people.

CITIC Trust has been organizing the “Integrity Culture Month” event for nine consecutive years, and has also released 24 issues of the “Discipline Inspection Classroom”.

Whistleblower Protection

We’ve established an accessible reporting channel and follow the Rules for Handling Reports and Accusations by Disciplinary Inspection and Supervision Organisations. We’ve developed Management Methods for Disciplinary Inspection, Supervision, and Reporting, Management Measures for Petition, and Measures for Encouraging Real-name Reporting and Punishing False Accusations and Framing. We’ve created Reporting Policies and Guidelines for Handling Reports for our operations in Hong Kong. We’ve defined the scope, channels, and processes for handling reports and petitions, while protecting the information of whistleblowers and safeguarding their legitimate rights and interests.

 

Employee Conduct Management

We’ve developed and implemented an Employee Code of Conduct in accordance with the Corporate Governance Code of the Hong Kong Stock Exchange. This code outlines requirements for directors and employees regarding personal behaviors, such as bribery, illegal gifts and commissions, acceptance and provision of hospitality, as well as relationships with suppliers and contractors, customers and consumers, employment regulations, compliance supervision, and enforcement methods. It stipulates that employees must comply with relevant laws, regulations, and company policies during work and related business activities. The company summarises and reports on its compliance performance twice a year across the entire system, and submits it for review by the Board’s Audit and Risk Committee. In the event of noncompliance, the company takes appropriate corrective measures and makes prompt rectification in accordance with relevant regulations.

We, along with all subsidiaries have put in place management systems for the use of funds, including Regulations on Official Hospitality Management, Implementation Rules for the Remuneration and Business Expenses of Enterprise Leaders, Measures for the Management of Business Hospitality Expenses , and Administrative Fund Management Measures. These systems ensure comprehensive management of budgeting, planning, approval, use, reimbursement, supervision, and accountability for funds. In addition, a special inspection team for fund use has been established by relevant departments, which carries out inspections across all departments and subsidiaries every three years.

CITIC Bank has formulated the Anti-fraud Audit Management Measures and conducts annual audits on employee behavior. By leveraging digital technology, they continuously improve their monitoring methods for employee behavior and focus on monitoring instances of malfeasance and violations of duty by employees in areas such as credit access, credit approval, asset disposal, centralised procurement, and salary expenses. In 2022, CITIC Bank integrated employee behavior audits into their special and economic responsibility audit work, with a focus on key positions and higher-level leadership. In addition, CITIC Bank has also established the Implementation Measures for Supervision and Discipline Enforcement Work, which provides clear regulations on the acceptance, processing, feedback mechanisms, and time limits for employees who wish to appeal disciplinary decisions and contest their penalties.

CITIC Securities has established an authorisation management system to effectively manage critical permissions within appropriate levels. This system comprises management authorisation, contract agreement authorisation, and special authorisation, and has proven effects in preventing and detecting risks related to integrity. Furthermore, the company has implemented a system to monitor employee communication behavior in order to comprehensively regulate their professional conduct.

Supplier management

We have established a procurement management mechanism and formulated the Procurement Management Regulations in accordance with the Bidding Law of the People’s Republic of China and the Ministry of Finance Interim Provisions on the Centralised Purchasing Management of State-owned Financial Enterprises. This ensures full-process management of procurement work throughout our organisation. By the end of 2022, the headquarter of the company had a total of 187 qualified suppliers registered, among which 176 are domestic and 11 are overseas.

In 2022, we identified weaknesses in the overall management, supervision, and inspection of our procurement processes. To address these issues, we have launched a special rectification session that is scheduled to be completed in 2023. As part of this effort, we have developed a Reform Program on Centralised Procurement Management Mechanism, which identified 10 reform measures and key tasks including the establishment of management agencies, clear division of powers and responsibilities, optimisation of procurement systems and workflows, enhancement of professional talent, and strengthened supervision and inspection, with the following key measures being taken to mitigate integrity risks:

Anti-Money Laundering

CITIC Limited has established the Anti-money Laundering Management Measures, which defines the management structure and devision of duties, and requires strict compliance with relevant laws and regulations. In the meanwhile, the company has built up and upgraded the Anti-money laundering screening system. CITIC Financial Holdings has developed the Anti-money Laundering and Anti-Terrorist Financing Management Measures, promoting the establishment of a clear and well-defined Anti-money laundering management system. The board of directors fulfill their management responsibilities in accordance with CITIC Financial Holdings’ articles of association and relevant regulatory requirements. Meanwhile, the management team is responsible for implementing Anti-money laundering risk management. CITIC Financial Holdings’ Compliance and Risk Management Department is in charge of centralized management of Anti-money laundering and implements Anti-money laundering policy. It also researches, implements, and guides the Anti-money laundering efforts of CITIC Financial Holdings and its financial subsidiaries.

Intellectual Property Management

We’ve put in place a specialised department that oversees the day-to-day management of legal affairs related to intellectual property right. In accordance with laws and regulations such as the Civil Code, Trademark Law, Copyright Law, and Patent Law of the People’s Republic of China, we have developed the Intellectual Property Management Measures to safeguard the rights of patents, works, trademarks, process flows, technical secrets, and other legally owned rights that arise from our business activities. In 2022, we focused on various initiatives such as “Protecting Proprietary Intellectual Property”, “Strengthening Brand Management”, and “Combating Intellectual Property Infringement”.