Qualified - EY

1 Qualified Intermediary (QI). Compliance program design and assessment New QI requirements The new compliance requirements propose challenging issues for responsible officers (ROs). QI ROs will need to respond quickly to the mandates of the proposed QI Agreement, which is scheduled to become effective 1 January 2017. Although changes to the proposed language are possible, the thrust of the main provisions was present in the 2014 version of the QI Agreement and thus is likely to remain. The QI Agreement requires that ROs submit the result of a current QI's first compliance review by 1 July 2018 (this date may vary depending upon the effective date of the QI's Agreement).

2 ROs must certify as to the efficacy of the QI's internal controls both for the QI's obligations under the QI Agreement and its FATCA requirements for the entire certification period (for most QIs, the first certification period is 30. June 2014 through 31 December 2017). In order for the RO to make this certification, a QI must have established a compliance program essentially a governance framework that includes: Requirement QI/RO responsibilities Written policies and procedures The QI must have up-to-date written policies and procedures sufficient for QI to satisfy the requirements of its QI Agreement as well as its Foreign Account Tax Compliance Act (FATCA).

3 Obligations, including a process for employees to escalate issues. Training The RO must communicate policies and procedures to all business units that are responsible for obtaining, reviewing and retaining documentation; making payments subject to withholding; or reporting payments and accounts. Systems The RO must ensure that systems and processes are in place to allow the QI to fulfill its FATCA and QI. obligations. Monitoring of business changes The RO must monitor business practices and arrangements that affect the QI's compliance with the QI.

4 Agreement; for example, the acquisition of a line of business. Periodic review requirement The QI must commission a periodic review of its compliance with the QI Agreement (similar to the previous QI audit). In addition to having a compliance program in place, a QI must have an internal or external reviewer conduct an independent periodic review (the testing of the application of the policies and processes against a sample of accounts) as well as the QI's reporting and withholding for any one calendar year in the certification period ( , 2015, 2016 or 2017).

5 QIs may be challenged by implementing new procedures, remediating failures and adhering to new internal controls established by an RO in the short time suggested by the proposal. QIs may find performing an assessment prior to the year of the periodic review to be helpful in order to avoid any surprises, especially in light of the recent implementation of FATCA. How EY can help Compliance program/governance framework Periodic review (internal controls) Periodic review (fact finding). design Support the development and documentation We codevelop assessment criteria based on the risk We execute sample testing using a standard of a compliance program and infrastructure, profile of QI responsibilities.

6 Process that helps ensure quality and delivers including policies, procedures, training modules results in a timely and cost-effective manner. and systems, to comply with documentation, reporting, withholding and other requirements of the agreement. Establish risk and control standards organized We have developed a proprietary business risk We have developed standard periodic review around roles, responsibilities and reporting lines assessment methodology to evaluate the control procedures based on Rev. Proc. 2002-55 and that ensure communication to eliminate gaps environment and support your internal control the objectives outlined in Section 10 of the QI.

7 Between the compliance program design and certification. Our assessment is designed to Agreement to produce the factual information operational realities. provide early identification of material failures, requested by the IRS. control weaknesses and operational failings. Leverage predefined policies and procedures, We will also deliver remediation plans for any We can develop a program and train your audit training modules, and control and compliance material failures and recommend improvements staff to conduct the periodic review.

8 Frameworks that are continuously updated based for the design of your control environment, to on industry experience and previous assessments. strengthen the risk and control awareness of stakeholders. Develop a compliance program that allows business We can also assist you in developing ongoing units to conduct their activities in ways that compliance testing programs to support internal comply with regulations and serve operational and control certifications. competitive needs. Our core team has extensive experience with multi-jurisdictional QI audits and health checks, most notably across Asia, Europe and the UK.

9 Canada US Luxembourg Americas Jillian Nicolson Tara Ferris EMEIA Christian Daws Asia-Pacific Partner, Financial Services Principal, Financial Services Executive Director, Financial Services Organization Organization Bermuda Ernst & Young LLP Ernst & Young LLP France and Monaco Organization Hong Kong Ernst & Young LLP. Bill Bailey Todd Larsen Loubna Lemaire Phil Gough Partner, Financial Services Uruguay Executive Director, Financial Partner, Financial Services Executive Director, Financial Services Organization Organization Ernst & Young LLP.

10 Services Organization Organization Switzerland Ernst & Young LLP. Alejandro Barboni Ernst & Young LLP Ernst & Young LLP. Partner, Financial Services Patrick Fitzgerald Paul Ho Organization Phil Garlett Senior Manager, Financial Services Ernst & Young LLP Executive Director, Financial Germany Organization Partner, Financial Services Ernst & Young LLP. Services Organization Ernst & Young LLP. Ernst & Young LLP Petar Groseta Partner, Financial Services Hans-Joachim Jaeger Justin O'Brien Organization Partner, Financial Services Japan Principal, Financial Services Ernst & Young LLP Ernst & Young LLP.