1 1 © 2013, Confidential, Pegasystems Inc.

FATCA Update: The State of

FATCA Compliance

Gerald Francese, FATCA Regulatory Leader

Alan Granwell, FATCA Team Leader, of Counsel

Reetu Khosla, Global Director, Risk, Fraud and Compliance

Erick Christensen, Head of Compliance Practice

2 2 © 2013, Confidential, Pegasystems Inc.

Preparation for FATCA Compliance

Gerald Francese, FATCA Regulatory

Leader, DLA Piper LLP

Alan Granwell, FATCA Team Leader, of

Counsel, DLA Piper LLP

3 3

Foreign Financial Institutions(FFIs) Immediate Steps

FATCA will come into effect January 1, 2014, with specific reporting, withholding and certification requirements to phase-in through 2017, and potentially later

Global FFIs will need to assess the FATCA status of each of their Expanded Affiliated Group businesses and determine how those that are FFIs will become compliant

Requirements may differ depending whether a particular FFI is domiciled in:

A non-IGA country

A Model 1 IGA country

A Model 2 IGA country

Implementation of FATCA technology, processes, procedures and protocols

Identification of variances, particularly Model 1 local law variances

4 4

Preparation for FATCA Compliance

Milestones:

Project planning to minimize FATCA impact and optimize automation

Due Diligence New Account On-Boarding

Existing Account Due Diligence

Contracts and Transactional Agreements

Registration

Reporting

Withholding

Compliance and Verification Monitoring, Testing and Certification

Recordkeeping

Creation of comprehensive timeline for completion of milestones

5 5

Project Planning

Determine the FATCA status of entities /lines of business within your Expanded Affiliate Group

Identify conflicts of law for non-IGA countries and cross-border data management issues

Review FATCA impact on other regulatory and contractual requirements

Review opportunities to minimize FATCA impact (ring-fencing)

Determine where automation will drive cost/benefit efficiencies

Consider other opportunities for savings such as entity rationalization

Consider future-proofing for Evolving FATCA

Future FATCA-like laws

Business change

Other regulatory compliance and reporting requirements that leverage existing KYC and transactional systems

6 6

Due Diligence

Pre-existing accounts

Monetary exemptions

Low-value accounts

High-value accounts (enhanced due diligence)

New accounts

New on-boarding procedures

Waivers, where necessary

Contracts

Grandfathering

Collateral and other transactional Agreements

7 7

Registration

Timely action to register

Obtain GIIN

Sign FFI Agreement(s), where necessary

Coordination among EAG

8 8 © 2013, Confidential, Pegasystems Inc.

FATCA Requirements: Integrating

Technology, Operations, and Legal

to Meet Pressing Compliance

Deadlines

Reetu Khosla, Global Director

Risk, Fraud and Compliance

Pegasystems Inc.

9 9

Compliance and Verification

Determine how EAG will comply

Appoint Responsible Officer(s)

Development of compliance program

Preparation of audit verification protocols

Develop systems to keep required information and

related procedures for prescribed periods

due to the evolving nature of FATCA, date stamping and

procedure capture for decisions

10 10

Headlines and Industry Concerns: FATCA

WHAT ABOUT LOCAL PRIVACY LEGISLATION?

Legal and Operational evaluation of current processes and systems enhancements required to

meet deadlines.

11 11

FATCA: January 1st 2014 Impact on KYC & On-boarding Systems for January 1st, 2014

On-boarding

Data, systems, processes, channels, KYC/AML will need to be evaluated and

enhanced

For due diligence specifically, FSI must review and interpret:

Products (depositary accounts, custodial accounts, equity and debt instruments,

or cash value insurance accounts)

Clients (direct or indirect US account holders, review and categorize into FATCA

“Chapter 4” categories

Exemptions

Geographies (IGA jurisdiction, local laws, standard account terms and conditions,

new account opening docs, consents/waivers)

Define and create appropriate due diligence rules by LOB, product, customer

type etc.

Automate and change as required

What do new regulations mean for On-boarding /KYC processes? ?

Automation is the only way to minimize customer impact and

reduce on-boarding time.

12 12

Unifying KYC/Suitability/Sales Platform for FATCA Unified Rules and Processes

Multi-Channel Interaction Management

Servicing Backbone

Integration

Apply KYC: FATCA

Suitability Approval Activate

3rd Party Legacy Sys Legacy Sys Legacy Sys

Web Self Service Broker Phone Sales Officer

13 13

Global Business: Managing KYC/FATCA Regulations Specialized Rules By Geography and Business Line

Risk-based approach to meet requirements

Common Practices

Differences:

Type of Customer

Product Type

Business Line

Customer Profile

Regulation

Business Rule Changes Regulations Change Risks Change

Wealth Securities

Canada

Europe

Common CDD/EDD/FATCA Policies and Procedures

Global Corporate Governance

North America FATCA

FATCA US UK

Asset Management Investment

Banking

Dodd-Frank IGA

Your bank FSI

14 14

FATCA: Functionality & Legal Requirements What’s required to meet compliance requirements within technology?

Integrate with CIF, tax reporting, on-boarding systems

Master 360 degree customer view across LOB, for ‘customer’ reporting

Manage privacy rules

Data capture and management of relationships (direct/indirect)

Re-use of existing systems

Rules-driven due diligence based on indicia, customer type, product, geography, IGA

Complex relationship management: (Parent/Child) for US party indicia and majority ownership thresholds (i.e. >10% FATCA)

Managing change in US indicia through automation of re-reviews

Rules driving thresholds for diligence levels(i.e. >$1Million for enhanced due diligence)

Look-back automation and management including STP for exempt accounts, auto-case creation, applying the right FATCA type based on customer data (standard, alternate, enhanced, exempt)

Master Customer profile with FATCA data for compliance reviews reporting across LOB and geographies

Reporting & Withholding

Future-proofing: New requirements, products, M&A, new IGA’s

Managing legal requirements and operations within technology

Large FI’s are using FATCA as an opportunity to update their KYC and on-

boarding systems turning compliance into a business benefit.

15 15

FATCA: Pre-existing Look-backs(NFFE/FFI) Auto-Case Creation, Rules defining due diligence requirements,

exemptions US account or not?

US Citizenship/ Permanent Residence

US Mailing/Legal

Address

Underlying Party US Citizen/

Permanent Residence

Articles of Incorporation

Country of Incorporation

W-9 Form

No indicia of US or non-US

Underlying/ Related Party

CIF/

MDM

System of

Record

System of Record

On-Boarding

System(s)

Output

Tax Reporting System

Transaction Monitoring

ABC Corp Jane Doe John Doe

FOLDER

John Doe For future re-use of

data, compliance

reviews, reporting,

etc…

FOLDER

Joane Doe For future re-use of

data, compliance

reviews, reporting,

etc…

FOLDER

ABC Corp. KYC Requirements

-Account(s)

-Account holders (Jane

Doe, John Doe)

-FATCA classification

Legacy Systems

Integration

Decision

Auto-Resolve Report to Tax

Group

Classification

Recalcitrant US

Account Non-US Account

Due Diligence (By Type)

Documentation Due Diligence

Rules

Qualification

Value of Account (i.e. >50K)

Exempt

Auto-Case Creation

Master Folder Rules driving due

diligence

Know Your Customer System

US

Indic

ia

16 16

On-boarding

Audit & Reporting

Rules-Driven Suitability/Product

Selection Age

Income

Risk Tolerance

Investment Experience

Investment Objectives

Products

Booking Location

Security Futures

• Higher Risk

Hedge Fund

• Higher Risk

Mutual Fund

• Lower Risk

System of Record

Tax Reporting System

Rules-Driven KYC Technology Relationship Management: 360 View

Unified KYC/FATCA/Suitability Auto-Case Creation, Rules defining due diligence requirements

CRM

Driver

Data

Multiple

Streams

Agility: As risks and requirements

change designated business users

should have the ability to update rules

and processes.

ABC Corp Jane Doe John Doe

ABC Corp

Jane Doe John Doe Bob Smith

Acme

Country Products Dynamic

Risk Rating

Driver Data

• Type

• Risk

• Legal/Mailing

SDD Requirements

EDD

Requirements

Screening Integration

Existing Client

Legal Entity/

Booking Entity

Underlying Parties

Suitability Requirements

• FINRA

• MiFid

FATCA Requirements

Web Self Service

Broker

Phone

Sales

17 17

Only way to ensure compliance:

Legal, Technology and Operations

Legal interpretation for each line of business, product and geography

Legal interpretation implemented and maintained in KYC/FATCA technology

Leveraging existing infrastructure

Lending privilege protection and confidentiality to the FATCA program (tech & ops)

Issues will be resolved under the cloak of legal privilege extended to all partners

Ability to confidentially resolve FATCA and other regulatory compliance issues with direct regulator contacts

A risk-based strategy and roll-out on a jurisdictional, product and client type basis

Automation of exemptions and pre-existing account due diligence and verification will provide further efficiency, and cost reduction

Agility to ‘future proof’ your technology

100% Auditability

FATCA can become a benefit by streamlining on-boarding and manual processes

What approach are complex FI’s following to ensure compliance while

saving costs? ?

18 18

Ensuring FATCA Compliance: Legal, Technology

& Consulting Three World-Class Organisations

-Managed Service: legal, technology and operational approach

-Evaluation of existing infrastructure, data management, systems and operations

-Implementation and maintenance of legal advice into Pega KYC solution

-Risk-based approach

-Remediation of look-back

-Proprietary IP legal advice on top of Pega KYC customizable software that facilitates product, client and geographic compliance with FATCA

-Privilege to client

-Future-proofing and monitoring for legal changes

-Pega KYC/FATCA Technology

-Legal Advice Implemented by Client’s specific products, LOB, exemptions into Pega technology

-FI’S IP layer maintained by Capgemini and DLA Piper as regulations change, new products & geographies added

19 19

What does this mean?

100% Compliance & Audit history based on product, country, LOB

70% Faster On-boarding and time to revenue

Customer Centricity: 360 degree view of a client

60% reduction in manual processing

Ability to extend to full on-boarding, suitability end-to-end sales platform

Agility to manage new risks and regulatory requirements in days vs. months

FATCA

from

burden to

benefit.

Why are FI’s and Insurance company’s following this approach? ?

20 20 © 2013, Confidential, Pegasystems Inc.

Capgemini: Integration and

Configuration Services

Erick Christensen, Head of Compliance Practice

Capgemini

21 21

Capgemini Integration and Configuration Services

22 22

Capgemini – ‘Compliance Operationalisation’

Analysis guidelines

Customer data extraction and review

Review of the data gathering process and annual review of accounts

Governance and implementing change

Customer Due Diligence Review – pre-existing accounts and new accounts

Tracking of documentation and evidentiary information

Quality assurance of original KYC info

Legal Advisory and Compliance support

Validation of existing process and procedures against FATCA , the Regulations and

IGA requirements

Develop (in conjunction with DLA Piper) training programs to ensure employee

coordination

Update FATCA compliance requirements

Future proofing for business change, regulatory change, additional FATCA changes

and any other regulatory changes

23 23

Capgemini – Business Process Management

Capgemini can assist RBS with the following specific tasks regarding the FATCA Process

Segmentation and classification of pre-existing account holders

Segmentation based on account size, geographies, products and clients

Carrying out the cleaning, enhancing and normalisation of the customer database

Gap identification, Verification of documentation and request for FATCA specific documentation from account holders

Review of the data gathering process and annual review of accounts

Gap Analysis and compliance

Validation of existing process and procedures against FATCA requirements

Definition and Assessment for purpose of IRS reporting and system audits

Implementation of verified, replicable, consistent processes

Supported by an ‘industrialised’ change management methodology

Customer Due Diligence Reviews

Collection of customer information, classification

Tracking of documentation and evidentiary information

Ongoing review and verification of customers

Transactional compliance review

Validation of transactional data to ensure compliance to FATCA requirements

Define a process for managing and monitoring control activities ensuring compliance

24 24

Capgemini Data Management

Using Accurate Data to Create Meaningful Information is key

Underlying Data

A customer – centric view is essential to ensure compliance

Integration of diverse applications to provide a single view is challenging

Data Governance & Data Quality standards need to be set and managed with clear ownership

Data sources and new applications require a robust support model for ongoing delivery

Data Analysis & Reporting

On the underlying data there needs to be the right mechanisms to analyze the data

Integration of Pega and other analytical tools are key

Clear definition of reporting requirements to HMRC / IRS, with in-house MI Dashboards

25 25

Capgemini Data Management

Capgemini has a track record of System Integration and Database Development/Data Warehousing within the RBS Group

Capgemini has specialists within the Business Information Management discipline covering:

Master Data Management

Building or Enhancing Data Governance

Data Analysis and Modeling

Database Design and Construction

Extract Transfer & Load (ETL)

Development of Analytical tools

Reporting Requirements and Dashboard development

Example:

Underlying

Customer Data

Store(s)

Applications/

Analytical Tools

Source

Systems

Reporting

26 26

Verification and Validation

Acquire

Training

Existing documents

FATCA experts

Build

FATCA Test

Repositories

Knowledge documents

Reusable Test Assets

Accelerate

& Excel

Innovations

FATCA specific test

workbench

Competency building

programs for FATCA

The Capgemini FATCA Test Workbench is

a combination of: quality assurance

artifacts; best practices; and technologies,

which have been developed to provide a

head start in testing FATCA Regulation for

the banks

Our approach on capability building for

FATCA Workbench

The information contained in this presentation is proprietary.

© 2013 Capgemini. All rights reserved.

www.capgemini.com

28 28

Q & A

29 29

Appendix

30 30

Capgemini Group Overview (2011 full year)

Canada

United States

Mexico

Brazil

Argentina

All over Europe

Morocco

Australia

People’s Republicof China

India

Chile

Guatemala

Singapore

Philippines

Taiwan

Vietnam

UnitedArab Emirates

Malaysia

UK & Ireland 8,977

France 21,307

Benelux 10,391

Nordic Countries

4,538

North America 9,505

Central & Eastern

Europe 8,962

Morocco 431

Italy 2,381

Iberia 4,942

India 35,727

Latin America 9,176

Asia Pacific 3,370

Revenue 2011: €9,693 million

Operating margin: €713m

Operating profit: €595m

Profit for the period: €404m

Net cash and cash equivalent: €454m

Group workforce

119,707 Working offshore

44,467

5.3%

41.5%

37.5%

15.7%

Outsourcing

Services

Local

Professional

Services

Consulting

Services

Technology

Services

Revenue by Business

Energy, Utilities &

Chemicals

Financial

Services

Other

Public Sector

Telecom,

Media &

Entertainment

Customer products,

retail, distribution &

transportation

Manufac-

turing

10.8%

4.4%

24.3%

9.3%

17.7% 20.8%

12.7%

Revenue by Industry

Cap Gemini S.A.” is a member of the

CAC40, listed in Paris

ISIN code: FR0000125338

Note: Our brand name is “Capgemini” but

the name of our share on the stock

exchange is “Cap Gemini S.A.”