1. FedGlobal International Payments Jorge Jimenez Jorge.jimenez@atl.frb.org Federal Reserve Bank of Atlanta Retail Payments Office

2. 2 International opportunity 2 Source: Federal Reserve Banks. Spring 2011. Countries 2009 Business account to account payments 2011 Business account to account payments 2009 Consumer account to cash payments 2011 Consumer account to cash payments Mexico*n/a68%n/a55% Europe37%66%21%24% China25%58%13% Japan18%42%9%13% Central America18%24%14%21%

3. 3 International tools 3 Source: Federal Reserve Banks. Spring 2011.

4. International Business Payments International Payments Today Traditionally only offered by the largest global banks High fees compared to domestic Beneficiaries paying beneficiary deductions

5. 5 Remittances Today Workers Remittances P2P Traditionally offered by Money Transfer Providers in non banking channels Today many senders have bank accounts International Consumer Wires are now considered remittances too

6. Workers Remittances P2P International Business Payments ACH International Expanding ACH

7. FedGlobal: expanding FedACH’s reach 7 Live South America Argentina, Brazil, Columbia, Peru, Uruguay (A2R)D + 1Central America Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua (A2R)D + 1 PanamaD + 2 North America CanadaD + 1 Mexico (A2A and A2R)D + 1 Mexico – F3X (Mexican Peso)D + 1 RegionCountriesFunds to RDFI EuropeAustria, Belgium, Cyprus, Czech Rep., Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, Malta, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland, United Kingdom D + 3 F3X (Euro and UK Pound)D + 2/D+3

8. FedGlobal benefits No Beneficiary Deductions Lower Costs True Innovation in Banking Consistent Delivery Times Best Foreign Exchanges International Offering Accessible to all institutions regardless of size FI can also handle own exchange International Business Payments ACH International Improves transparency for customers

9. FedGlobal® Features FedGlobal® offers payment delivery options in select countries. These options may include… Account-to-Account (A2A) The standard option of distributing payments between two deposit accounts (US to Canada, Europe, Mexico & Panama) Account-to-Receiver (A2R) [Outbound Credits Only] This option allows funds from accounts at a U.S. depository financial institution to be retrieved by any receiver at either a participating bank location or at a trusted, third-party provider in certain receiving countries. ($1,000 or less per item) 9

10. Foreign Exchange Options The FedGlobal Service accommodates the following foreign exchange options [varies by service country]: Fixed-to-Variable: USD to Local Currency FX rate conversion performed by Foreign Gateway Operator Fixed-to-Fixed: USD to USD Transfer and receipt of USD to U.S. dollar-denominated accounts Fixed-to-Fixed: Local Currency to Local Currency (“F3X”) FX performed by ODFI Settlement process is outside of U.S. ACH Network 10

11. 11 Fixed-to-Variable (FV) (USD to Pesos) Example: Fixed-to-Variable payment to Mexico 11 ODFI FedGlobal Gateway Operator RDFI BANXICO Gateway Operator IAT Local USD MXN FX 02:15 a.m. ET Day 0 Day 1

12. A2R Latin America (including Mexico) Allows payments from accounts at a U.S. depository financial institution to be retrieved by any receiver at either a participating bank location or at a trusted, third-party provider in certain receiving countries. Delivery to Latin America leverages the Federal Reserve’s Gateway Operators: Banco de Mexico in Mexico and Banco Rendimento through MFIC reaching another 10 countries in the region More than 8,000 delivery points Millions of potential Receivers 12

13. Domestic vs International ACH In domestic transactions you can use US ABA# and Account number, but what about International transactions? 13 Image Source Page: http://howtogeekon.com/2010/05/18/fit/square-peg-in-a-round-hole_0565/http://howtogeekon.com/2010/05/18/fit/square-peg-in-a-round-hole_0565/

14. International A2A Gateway RT and Canada: CPA # and Account number Panama:RT# and Account number Mexico: ABM# and CLABE (18 digits) Europe:BIC# and IBAN 14

15. International A2R Gateway RT and Mexico: 647R (ABM) Password (acc#) Latin America:CO00212336750000023642 (table from fedglobala2r.com) 525565656511 (phone number) 15

16. Driving compliance provisions include: Financial Recordkeeping and Reporting of Currency and Foreign Transactions Act of 1970” – (BSA) Money Laundering Control Act of 1986 USA PATRIOT Act of 2001 CIP provisions (Sec. 326 USA Patriot ACT) Office of Foreign Assets Control 1073 Dodd-Frank Your Regional Payments Association can help you stay updated 16 Compliance Fundamentals

17. 17 FedGlobal Compliance FedGlobal monitors payments processed and maintains a compliance program which includes: 1)OFAC and Anti-Money Laundering policies and procedures; 2)Transaction monitoring in support of OFAC and AML due diligence 3) Establishing compliance obligations for payment processing in agreements with gateway operators and third-party service providers; 4) Risk assessments of FedGlobal offerings that include evaluations of gateway operators and third-party service providers as well as country risk assessments

18. All Consumer originated transactions are now considered Remittances and fall under Reg.E. Consumers need to be provided with the following disclosures at time of origination among other provision Exact Foreign Exchange (or Estimated in some FedGlobal cases) Exact fees and taxes applied at origination Exact fees and taxes applied at receipt Exact day of funds availability to beneficiary While Industry impact still uncertain, your Regional Payments Association can help you stay updated 18 Dodd-Frank: Some considerations

19. Working past the Silos When thinking of implementing FedGlobal we suggest you include representatives from… … 19 Treasury ServicesCompliance Community DevelopmentInternational Desk (if present) Retail BankingOperations

20. Opportunity 20 While there is a significant margin available, the transaction itself is not normally the primary revenue objective but rather the financial institution’s overall relationship and cumulative sum of business revenue with the customer. Overall customer relation involves: quantifying customer retention and acquisition quantifying revenue potential on cross-selling opportunities CountrySurcharge to financial institutions Average cost to consumers Account to: Account (A2A) Unbanked (A2R) Mexico$0.67$3.45$12.59 Brazil.$4.40$13.34 Colombia.$4.40$21.05 El Salvador.$4.40$11.08 Guatemala.$4.40$13.64 Honduras.$4.40$10.34 Peru.$4.40$15.27 Europe$1.25.$30-$70 Panama$0.72.$30-$70 www.remittanceprices.worldbank.org/countrycorridors. August 2010 Not official data for Europe and Panama. Anecdotal data based on limited customer data

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