Business ethics and compliance

Relevance of the topic

Responsible and fair business practices in accordance with statutory and regulatory provisions and the recognised professional principles of the banking industry provide a foundation rooted in trust for cooperation between LUKB and its stakeholders, thereby helping to reduce LUKB's compliance and reputational risks.

Principle

LUKB is committed to responsible business practices and ensures sustainable, ethical corporate governance. It is committed to upholding human rights as well as the associated international standards and all applicable statutory and regulatory provisions. Legal and regulatory developments are continuously monitored in order to implement new requirements in a timely and consistent manner.

Target

LUKB remains free of reputational damage caused by failure to comply with applicable laws and regulations.

Status in 2025

Compliance management

LUKB has a central Compliance function for the Group that is independent of revenue-generating business activities. It reports directly to the CEO. Compliance supports the Executive Board and employees as they enforce and monitor compliance.

LUKB pursues the following compliance risk strategy:

  • Legal, regulatory and internal regulations are complied with.
  • Customary market standards and rules of professional conduct are observed.
  • Managing compliance risks is an integral part of Group-wide risk management and is based on the risk appetite defined by the Board of Directors and the defined compliance risk tolerance. Compliance with risk appetite and risk tolerance is regularly reported to the Board of Directors.
  • Central elements of the compliance culture are the Code of Conduct and the values of LUKB.

Compliance management encompasses a systematic set of internal rules, comprehensive training and development programmes, a systematic control system and consistent sanctions in the event of misconduct.

The Compliance function reports annually to the Executive Board, the Audit and Finance Committee of the Board of Directors (AFC-BoD), and the Board of Directors on its activities, its assessment of compliance risk and compliance with the defined risk tolerances. It has the authority to go straight to the Board of Directors where necessary. LUKB also has an independent Risk Control function.

LUKB's compliance and risk management systems fully cover all relevant compliance topics and risk types. They comprise the entire LUKB Group with its 23 branches and sales offices as well as its wholly owned subsidiary LUKB Expert Fondsleitung AG. All branches, sales offices and the wholly owned subsidiary are located in Switzerland. With the exception of the office in Zurich and the sales offices in French-speaking Switzerland and Ticino, all locations are in close proximity to each other in the Canton of Lucerne. The branches and sales offices do not have their own legal personality, but are integral parts of the parent company, Luzerner Kantonalbank AG, and are fully subject to its management structure and culture.

LUKB has systems in place to identify and monitor changes in the legal and regulatory environment. Relevant regulatory developments, their impact on LUKB and the status of implementation are periodically reported to the Executive Board, the Risk and Strategy Committee (RSC-BoD), and the Board of Directors and dealt with by these committees. The annual report of the Compliance function includes the current, amended and new standards relevant to LUKB and compliance with them, the implementation status in the business areas and the status of relevant behavioural and compliance topics, such as anti-money laundering, data protection, sanctions, market behaviour, marketing and sales as well as suitability. The latter refers to the suitability test required by law, which ensures that the financial products recommended correspond to the knowledge, experience, objectives and risk tolerance of the clients. LUKB consistently develops and sells its products and services in line with these guidelines.

All LUKB employees must attend mandatory compliance training on a regular basis. The training courses include, but are not limited to, the following topics:

  • Combating money laundering and the financing of terrorism, including preventing aiding and abetting tax evasion
  • Compliance with market behaviour rules
  • Combating corruption
  • Protection of personal data and information security
  • Compliance with sanctions measures

As part of their induction, new employees are required to attend relevant training courses that are specific to their role or business area. The content and functionality of the products and services offered are also communicated, including the relevant marketing and sales aspects as well and the due diligence obligations to be observed in this context.

LUKB employees at all management levels are subject to specific policies setting out the principles and guidelines of LUKB. The values set out in the Group-wide Code of Conduct1) are regularly addressed and exemplified by the Board of Directors and the Group Executive Board.

LUKB expects the suppliers concerned to comply with the Supplier Code of Conduct1). This sets out standards for business integrity and ethics, social and environmental responsibility as well as the corresponding management systems. LUKB requires suppliers and subcontractors to comply at all times with the applicable laws as well as with supervisory provisions and guidelines. All forms of corruption and other criminal activities are prohibited.

Further details on the Compliance and Risk Control functions: see the LUKB 2025 Annual Report, Group financial report, ‘Risk management’ section.

1) https://www.lukb.ch/ueber-uns/english-window

Compliance with due diligence obligations

LUKB undertakes, to the extent of its capability, to combat crime, corruption, money laundering and the financing of terrorism. To this end, it consistently implements national and global regulations and sanctions, for example by automatically comparing personal and payment transaction data with applicable sanctions lists in order to identify sanctioned individuals and entities and to prevent prohibited payments. Furthermore, LUKB does not enter into any business relationships that are not in line with its risk appetite. For example, LUKB does not enter into business relationships with clients from countries classified as high-risk jurisdictions by the Financial Action Task Force (FATF)1). It also applies special due diligence obligations to countries under increased monitoring.

1) https://www.fatf-gafi.org

Compliance with these requirements is ensured by an internal control system that complies with regulatory requirements. The effectiveness of the internal control system is regularly reviewed by the internal auditors and the external audit firm.

In line with the ‘Know Your Client’ (KYC) concept, LUKB identifies its contractual partners (including beneficial owners) in accordance with the provisions set out in the Swiss Banks' Code of Conduct with Regard to the Exercise of Due Diligence (CDB)1) and Swiss money laundering legislation. This includes checks and background enquiries (enhanced due diligence) in the case of client relationships or transactions involving greater risk, both when the business relationship is opened and while it is ongoing.

1) https://www.swissbanking.ch/en

LUKB does not open or maintain any business relationships with clients if KYC information is insufficient or if there is reason to assume that LUKB products or services are being or intended to be used for illegal purposes. Similarly, we do not open or maintain any relationships where there is too great a risk of financial crime or reputational damage.

LUKB monitors client relationships and transactions using a variety of systems that, among other things, automatically compare names with updated lists provided by a global data supplier. The measures provided for in law are taken if a potential link to crime is found. This applies in particular in connection with money laundering, terrorism, drug trafficking, corruption, the arms trade or human trafficking. Suspicious business relationships and transactions are reported to the competent authority in accordance with the applicable anti-money laundering or embargo legislation.

LUKB maintains directives, work instructions, manuals and processes defining due diligence obligations with regard to combating money laundering and the financing of terrorism, compliance with sanctions and other conduct topics such as market behaviour rules, suitability, product information and sales training. Compliance with these requirements is monitored by the line managers as part of the internal control system (ICS) and verified by the independent control bodies. In addition, the ICS is audited by the internal auditors and the external audit firm.

Responsibility in matters relating to tax

LUKB rejects any form of tax evasion and expects its clients and business partners to do likewise. It does not support its clients or third parties in avoiding the payment of taxes owed and rejects aggressive tax planning that is at odds with the spirit of the law and common practice.

Actively aiding tax evasion in any way is prohibited at LUKB. For example, new clients are required to provide confirmation of the tax compliance of the funds they entrust to the Bank. As a Swiss financial institution, LUKB fully implements its obligations under the Automatic Exchange of Information (AEOI) based on the requirements of the OECD1) and Swiss implementing legislation as well as the Foreign Account Tax Compliance Act (FATCA)2) of the United States of America.

1) https://www.oecd.org
2) https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca

The directives on tax compliance are intended to prevent undeclared funds from reaching LUKB. They are based on the premise that clients are responsible for preparing their tax returns, paying their taxes and complying with all other legal and regulatory requirements that apply to them. LUKB requires all new clients to submit a written declaration regarding their tax compliance.

LUKB meets the requirements of the OECD standard on the automatic exchange of financial account information in tax matters. LUKB complies with the Agreement between Switzerland and the United States of America on the Foreign Account Tax Compliance Act (FATCA). It constantly monitors the regulatory framework and updates its tax compliance directives, processes and documents as necessary.

LUKB also endeavours to make tax returns as easy as possible for its clients. Clients automatically receive a complete tax statement from LUKB.

Luzerner Kantonalbank AG (parent company) and its wholly owned subsidiary LUKB Expert Fondsleitung AG have their legal domicile in Switzerland and are therefore fully liable for taxation in Switzerland. In order to ensure legal certainty regarding the tax treatment of certain scenarios, binding information and agreements have been concluded with the competent tax authorities (tax rulings).

Combating market abuse and corruption

LUKB prohibits all employees (at all management levels, including members of the Executive Board) and all members of the Board of Directors from engaging in any market abuse. This includes the use of inside information (e.g. front, parallel or after-running), market and price manipulation as well as any other form of fraudulent activity.

These rules are set out in regulations and directives and also apply to market abuse by clients. There is also a separate directive on trading for the Trading department.

LUKB conducts regular training courses to ensure compliance. Employees of the Trading department complete these annually. LUKB also monitors the market behaviour of its employees and clients by means of the systems and controls it has in place. External employees and outsourcing partners are contractually obliged to comply with the corresponding obligations.

LUKB tolerates neither the offering nor the taking of bribes. These specifications are enshrined in binding directives and regulations. Acceptance of gifts above a defined threshold or in situations with conflicts of interest is prohibited. Compliance with these rules is systematically monitored. The combating of corruption is an integral part of LUKB's internal rules and regulations.

The corresponding standards are integrated into the procurement processes and are contractually defined. Compliance with these standards is taken into account when selecting and maintaining relationships with service providers, suppliers and third-party providers. Relationships with key suppliers are regularly reviewed and monitored. All suppliers are obliged to confirm compliance with the standards.

As in the previous year, no significant corruption risks were identified in the 2025 reporting year and no confirmed cases of corruption among LUKB employees or management bodies were identified.

Avoiding conflicts of interest

LUKB's Ownership Strategy requires the members of the Board of Directors to give top priority to the interests of LUKB. This is taken into account in the planning and composition of the Board of Directors.

Conflicts of interest are dealt with in accordance with the Swiss Code of Best Practice for Corporate Governance. Conflicts of interest must be disclosed transparently and assessed on a case-by-case basis. Any person who is subject to a permanent conflict of interest may not be a member of the Board of Directors. According to legal requirements, members of the Government Council of the Canton of Lucerne, which is the majority shareholder of LUKB, are likewise not permitted to be members of the Board of Directors. In addition, the Government Council of the Canton of Lucerne refrains from nominating or electing members of the Cantonal Council or the Audit Office to the Board of Directors.

In their business activities, all governing and executive bodies and employees must conduct themselves in such a way to prevent any and all personal dependence, obligation or influence. Situations that might result in a conflict of interest with clients, suppliers, employees and LUKB must be avoided.

If there is an irreconcilable conflict of interest on the part of suppliers or external employees, LUKB refrains from entering into a business relationship with the supplier or external employee concerned. If conflicts of interest nevertheless arise, they must be disclosed and rules of recusal must be observed.

The acceptance of gifts is also subject to restrictions under regulations. LUKB has issued specific regulations for this purpose, which form part of the Employee Regulations and directives. These also contain corresponding control systems.

The number of mandates held by members of the Board of Directors and the Executive Board is limited, and all mandates must be approved. Mandates and shareholdings as well as the external interests of the members of the Board of Directors and the Executive Board are published in the Annual Report, as are any significant loans granted to members of the governing and executive bodies. The same person cannot serve on multiple boards of directors of related companies. The mandates of other employees is also subject to restrictions under regulations and is conditional upon approval.

There are separate regulations for the Board of Directors regarding the avoidance of conflicts of interest and external mandates. Directives regarding market behaviour rules and proprietary transactions apply to all other employees.

Details concerning transactions concluded for their own account by members of the Board of Directors, the Executive Board and other employees are governed by internal regulations and policies.

Employees at all levels, as well as members of the Board of Directors, receive regular training in the relevant areas.

Any conflicts of interest vis-à-vis stakeholders are subject to business confidentiality and must be treated in confidence.

Responsible marketing and sales practices

LUKB ensures that products and services, including financial advice, are provided reliably and that its dealings with clients are open and transparent. It also examines the risk of greenwashing. Measures to ensure responsible marketing and sales practices include:

  • LUKB has clear governance structures, directives and processes in place to ensure that advertising is carried out responsibly, transparently, objectively and in compliance with the applicable legal and compliance standards, including suitability standards. Decisions on brand evolution and the advertising concept are made by the Executive Board and the Board of Directors. Implementation is carried out by experienced marketing managers who are familiar with the bank's values, supported by external specialists, if necessary. In the case of legally relevant or risky content, the Legal department reviews the advertising.
  • When advertising products, LUKB attaches great importance to truthful statements. Product information is formulated in such a way that it is clear and understandable for clients. Exaggerated or misleading statements, including in the small print, are excluded. The aim is to create transparency and give clients the assurance that they can rely on the communicated benefits and sustainability promises.
  • In order to protect against over-indebtedness, LUKB takes precautionary measures, particularly when granting personal loans and bank cards. It also promotes its clients' financial literacy through regular, educational blog posts. Further information can be found in ‘Promoting financial literacy’ in the ‘Commitment to the region’ section.
  • LUKB's client advisors receive regular training in informing clients of the financial risks associated with the various products and services.
  • Clients can submit complaints or comments using the online contact form on the LUKB website, by email or by telephone. LUKB also provides information on its website about the right to consult the Swiss Banking Ombudsman – a free, independent information and mediation service for complaints against banks domiciled in Switzerland. The relevant contact details are also available there.

The following sections contain further measures that LUKB uses to ensure the quality and client focus of its products and services:

Product development and expansion of the range of services

When developing products and expanding its range of services, LUKB takes legal and regulatory requirements and industry-standard best practices into account. Binding legal standards and the applicable stringent ethical business standards are taken into account and adhered to as standard in development and sales. In doing so, LUKB is aware of its responsibility towards its clients and other stakeholders.

New product developments are initiated as part of a standardised product development process. In addition to the independent control bodies – namely the Risk Control and Compliance functions – other process and process execution managers, Credit Risk Management and Internal Audit must also be involved in the consultation processes. Your feedback is incorporated directly into the further design of the products.

The final approval of new products is carried out by the Executive Board. In the case of products with an increased risk potential, the approval of the Board of Directors is also required. New products may not be launched without these prior approvals.

Transparent fees

For years, the Bank has been publishing brochures in which the fees for its products and services such as accounts, credit and debit cards, investment advice and asset management are clearly presented. Clients will normally be notified at least 30 days in advance of any changes to fees or conditions.

Advice and information

Clients who open a custody account with LUKB are informed of the financial risks associated with investments. They receive a free digital copy – or a printed version upon request – of the guide ‘Risks Involved in Trading Financial Instruments’1) issued by the Swiss Bankers Association (SBA).

1) https://www.swissbanking.ch/en

LUKB sees it as its duty to communicate the opportunities and risks associated with its financial offers fairly, comprehensibly and truthfully. Compliance with the legal and regulatory requirements for the protection of clients is anchored in binding internal guidelines and work instructions.

Client advisors receive the appropriate training and are externally certified to ensure high-quality advice. They are also supported by specialist knowledge, clear processes and state-of-the-art software solutions. The compensation of the sales staff is structured in such a way that there is no incentive to recommend unsuitable products or services.

Investment business

LUKB meets the requirements of the Swiss Financial Services Act (FinSA), which ensures the protection of clients of financial services providers. In the context of investment advice and asset management, LUKB uses specialist applications to continuously and automatically check whether its recommendations match the individual investment profile. Financial circumstances, objectives, knowledge and experience, the investment horizon and risk tolerance are taken into account in this process. The advisors receive regular training on the relevant rules and processes.

LUKB also complies with the ‘Guidelines for the financial service providers on the integration of ESG-preferences and ESG-risks and the prevention of greenwashing in investment advice and portfolio management’1) issued by the Swiss Bankers Association (SBA). Clients are asked about their preferences as regards sustainable investments and have access to a wide range of solutions that meet their needs and follow widespread market practices in the sustainable investing space. The sustainability approaches applied by LUKB in its investment business are described in detail on the LUKB website.

1) https://www.swissbanking.ch/en

LUKB offers the right investment solution to meet every need. In the context of discretionary asset management, clients work with LUKB to determine the most suitable investment strategy. For investment funds in securities portfolios, LUKB takes into account the most advantageous share classes.

In terms of investment advice, LUKB recommends different investment universes depending on the investment solution. These comprise a balanced mix of LUKB's own products and external products that are selected on the basis of qualitative and quantitative criteria. The fee structure is based on an annual advisory fee, regardless of the number of transactions. This ensures that advice is provided objectively and free of sales incentives.

In the reporting year, no relevant irregularities were identified in product or service information that would have led to sanctions. Protecting clients in accordance with the Financial Services Act (FinSA) and preventing greenwashing are top priorities for LUKB.

LUKB is also a member of the FinanceMission association, which raises awareness among young people about how to handle money responsibly.

Human rights

Switzerland is a member of the United Nations (UN) and has signed all legally binding international human rights agreements based on the Universal Declaration of Human Rights (UDHR)1). The appreciation that there can be no lasting peace, security or economic development without the protection of human rights is reflected in the values and experience of LUKB. It is committed to complying with international human rights standards and identifies with the underlying values and concerns. The standards are implemented and put into practice by LUKB in the applicable HR regulations.

1) https://www.ohchr.org/en/human-rights/universal-declaration/translations/english

The Universal Declaration of Human Rights (UDHR) serves as a guide. The key aspects are integrated into business processes, including in particular in procurement, the investment and lending business as well as human resources management.

Switzerland, as the country of domicile of LUKB, has ratified 62 conventions and one protocol of the International Labour Organization (ILO), including all eight core conventions (i.e. core conventions 29, 87, 98, 100, 105, 111, 138 and 182). The current status of implementation of the conventions can be found on the ILO website1). Switzerland's national legislation implements ILO provisions accordingly, and is also binding for LUKB.

The principles relating to the prohibition of forced labour, compliance with minimum wages and maximum working hours are contractually imposed on LUKB's suppliers. LUKB itself complies with Swiss law, which is in line with international standards.

Due to the regional and national business activities of LUKB, the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct and the UN Guiding Principles on Business and Human Rights are not of primary importance for LUKB. Swiss national legislation implements the OECD Guidelines and the UN Guiding Principles accordingly and is also binding for LUKB.

1) https://normlex.ilo.org/dyn/nrmlx_en/f?p=NORMLEXPUB:11200:0::NO::P11200_COUNTRY_ID:102861

Equal opportunities, diversity and freedom from discrimination

The human resources policy at LUKB focuses on equal opportunities, freedom from discrimination, diversity and inclusion. In particular, this includes criteria such as gender, gender identity, age, marital status, religion, nationality, ethnic origin, skin colour, social background, physical limitations, sexual orientation, political beliefs as well as the recruitment of employees with different abilities. HR policy initiatives are governed by the Executive Board and by the Board of Directors' Nomination and Compensation Committee. In 2014, LUKB was the first bank in Switzerland to demonstrate in a recognised process that it provides equal pay regardless of gender. It reviews equal pay annually; see ‘Equal pay’ in the ‘Employer responsibility and attractiveness’ section.

Protection of the personal integrity of employees

LUKB pursues a zero-tolerance policy towards inappropriate behaviour, workplace bullying and sexual harassment. Those affected can approach internal contacts in Human Resources, who are able to take targeted action. This action may also include referral to external specialists. All persons involved are obliged to maintain absolute confidentiality.

LUKB places particular importance on ensuring compatibility between work and other areas of life. Accordingly, occupational health management (OHM), which addresses both physical health and mental well-being, is of major importance – particularly with regard to preventative and early detection measures. In addition, LUKB has designated internal contacts in Human Resources with whom employees seeking advice can contact in confidence in the event of problems of any kind. External specialists are involved as required. Further information on OHM can be found in ‘Occupational health and safety’ in the ‘Employer responsibility and attractiveness’ section.

Freedom of association

Freedom of association is guaranteed in Switzerland and enshrined in Article 23 of the Federal Constitution. Accordingly, every person has the right to form associations, to join or belong to associations and to participate in the activities of associations. No one may be forced to join or belong to an association.

LUKB guarantees its employees freedom of association. It allows them to join a trade union without hindrance. At events with employees and on the Intranet, it refers to the LUKB Personalverein (employee association) and the national industry employee organisation (Swiss Bank Employees Association SBEA1)). LUKB employees naturally have the right to form and join other employee organisations (trade unions, employee associations, employee councils, etc.) to promote professional interests.

1) https://sbpv.ch/en/

Social partnership

LUKB is committed to social partnerships and is in regular dialogue with the employee association. This enables it to identify any issues at an early stage and to find pragmatic solutions in consultation with the employee association. Further information on the LUKB Personalverein can be found in the ‘Employer responsibility and attractiveness’ section.

Political donations and other support

LUKB makes contributions to the parties represented in the Cantonal Council of the Canton of Lucerne in proportion to the distribution of seats. In 2024 and 2025, total contributions amounted to 60,000 Swiss francs per year; in the 2023 election year, 96,000 Swiss francs.

LUKB does not comment on political issues unless they relate to the bank's business activities or could have a material impact on its business environment. However, LUKB encourages its employees to get involved in the community, including in organisations of a political nature, and some employees hold public office in addition to their work at LUKB.

Critical concerns

Critical concerns can be raised with LUKB via a number of channels:

  • Reporting violations: LUKB employees are obliged to report potential breaches of external or internal regulations to their line manager or one of the control functions. External employees can use the whistleblowing email address (see below). They can also contact their client within LUKB or the Head of Legal Services & Compliance at LUKB personally.
  • Whistleblowing: A specially designated contact point for whistleblowing is available to employees and external persons (Head of Legal Services & Compliance, whistleblowing@lukb.ch). If desired, anonymous reports can also be submitted. The Head of Legal Services & Compliance assesses the information received confidentially. All further clarifications will also be treated confidentially. If necessary, the Head of Legal Services & Compliance will initiate further investigations in accordance with internal guidelines and directives. Any conflicts of interest are taken into account accordingly in these investigations. The Head of Legal Services & Compliance is obliged to refrain from disclosing the source of information at the request of the informant in order to protect their identity. Employees who file a report do not have to fear any adverse consequences (‘zero tolerance for retaliation’).
  • Violation of the personal integrity of employees: Those affected can approach internal contacts in Human Resources, who are able to take targeted action. This action may also include referral to external specialists. All persons involved are obliged to maintain absolute confidentiality.
  • Clients: In the event of questions, complaints or critical concerns, clients can contact their client advisor in person, by telephone, by post or by email or can contact LUKB via an e-banking message or using the contact form on the website. A predefined process establishes which client responses must be presented to other decision-makers. The Executive Board receives an evaluation of all complaints and concerns every six months and investigates any anomalies. Clients can also contact other bodies such as the Banking Ombudsman or the regulator.
  • Other stakeholders: All other stakeholders have access to the public channels for communicating with LUKB, which can also be used by clients.

LUKB also provides information on whistleblowing1) on its website. The LUKB whistleblowing policy can also be found there.

1) https://www.lukb.ch/ueber-uns/rechtliches/whistleblowing

Client responses and complaints are systematically recorded and evaluated by LUKB. The sales units report on the results to the Executive Board on a quarterly basis. On this basis, the Executive Board decides on measures to improve services, where necessary.

The Board of Directors is informed about important matters relating to risk management as part of the regular internal reporting and escalation process. In addition, the Board of Directors is informed about important concerns within the ambit of annual Legal and Compliance reporting. The Head of Legal Services & Compliance also has authority to submit an extraordinary report to the Board of Directors directly in the event of any serious violations.

In addition, the Executive Board informs the relevant Board of Directors committee about any complaints and concerns raised by clients and other stakeholders as required and, in coordination with the committee, the Board of Directors as a whole if necessary.

Various types of critical concerns are brought to the attention of the Board of Directors, which must be addressed by the Board and its committees. The total number and nature of critical concerns communicated to the Board of Directors are subject to business confidentiality and are treated in confidence.