Société Générale / Risk report 2021 - Pillar 3 2020

13 COMPLIANCE RISK, LITIGATION COMPLIANCE PILLAR 3 - 2021 | SOCIETE GENERALE GROUP | 218 Regarding market indices : the Group has implemented an action plan to control market manipulation risks. This plan is now well under way and has enabled contributions to the benchmarks to be supervised and their administration to be rolled out across the Group. In addition to contributions to benchmark indices and the administration of indices, the use of indices has been subject to regulatory restrictions since January 2020. The management of this system has been rolled out through instructions and training. SEPARATION OF BANKING ACTIVITIES The Volcker Rule published in December 2013 - which established a prohibition in principle for certain institutions in the financial services sector, such as the Societe Generale Group, to trade on their own account and to purchase or hold covered funds (1) on its own account - was subject to two major amendments in 2019 and 2020: the Volcker 2.0 amendment on trading and the Volcker 2.1 amendment on funds, respectively. These amendments ease the Societe Generale Group’s regulatory obligations. The Group’s Volcker/FBL system was brought into compliance with these amendments, which are effective as from 1 January 2021. DERIVATIVES Regulatory risks related to derivatives market activities are covered by European regulations (EMIR Regulation) and US regulations (Title VII of the Dodd-Frank Act, SEC Rules). These regulations were changed in 2019 (SEC Rules and EMIT), leading the Group to become compliant; in particular by updating the instructions and training required to manage the system. COMPLIANCE/TAX TRANSPARENCY Societe Generale Group’s principles on combating tax evasion are governed by the Tax Code of Conduct. The Code was updated in March 2017 and approved by the Board of Directors after review by the Executive Committee. It is a public document and can be consulted on the Bank’s institutional investor portal: https://www.societegenerale .com/sites/default/files/documents/Code%20de%20condu ite/Code_ de_conduite_fiscale_groupe_societe_generale_fr.pdf . The five main principles of the Code of Conduct are as follows: Societe Generale ensures that the tax rules applicable to its business p are followed in all countries where the Group operates, in accordance with international conventions and national laws; in its customer relationships, Societe Generale ensures that p customers are informed of their tax obligations relating to transactions carried out with the Group, and the Group complies with the reporting obligations that apply to it as bookkeeper or in any other way; in its relations with the tax authorities, Societe Generale is p committed to strictly respecting tax procedures and ensures that it maintains open and transparent relations to maintain its reputation; Societe Generale does not encourage or promote tax evasion for p itself, its subsidiaries or its customers; for its own account or for its clients, whose main purpose or effect is tax motivated, unless this is consistent with the intention of the legislation. Societe Generale has a tax policy in line with its strategy of p sustainable profitability and refrains from any operation, whether The Board of Directors annually reviews the application of the Code and the procedures and systems in place within the Group to ensure that new products and new entities comply with the Group’s tax principles. Relationships with legislators and tax law policy makers are governed by the Charter for Responsible Advocacy with respect to Public Authorities and Representative Institutions ( https://www.societe generale.com/sites/default/files/190426-vade-mecum-ri.pdf ) The Group is committed to a strict policy with regard to tax havens. No Group entity is authorised in a state or territory on the official French list of ETNCs ( États et territoires non coopératifs in French) (2) and internal rules have been in place since 2003 to monitor an expanded list of countries or territories. The Group follows the Organisation for Economic Co-operation and Development’s (OECD) transfer pricing standards. However, local constraints may require deviations from OECD methodologies, in which case the local constraints must be documented. The Group publishes information on its entities and activities annually on a country-by-country basis (for more information, see section 2.12 “Information about geographic locations and activities at 31 December 2020”, p. 60-61 of the 2021 Universal Registration Document) and confirms that its presence in a number of countries is for commercial purposes only, and not to benefit from special tax provisions. The Group also complies with the tax transparency rules for its own account (CbCR - Country-by-Country Reporting). The Group is fully committed to implementing regulations aimed at ensuring tax transparency for its customers’ accounts (in particular FATCA and Common Reporting Standard – CRS). Some of the tax regulations define tax transparency requirements. The FATCA (Foreign Account Tax Compliance Act), CRS (Common Reporting Standard), QI (Qualified Intermediary) and DAC 6 (Directive on Administrative Cooperation 6) regulations have the common goal of combating fraud and tax evasion by customers. The risks borne by financial institutions are financial, commercial and reputational in nature. The Group’s main challenges involve adapting to regulatory developments, which are becoming increasingly stringent over the years, and strengthening its control systems. Societe Generale complies with tax transparency standards. The Common Reporting Standard (CRS) enables tax authorities to be systematically informed of income received abroad by their tax residents, including where the accounts are held in asset management structures. Moreover, Societe Generale complies with the requirements of the United States FATCA (Foreign Account Tax Compliance Act), which aims to combat tax evasion involving foreign accounts or entities held by US taxpayers. Non-US financial intermediaries are thus responsible for identifying US taxpayers in their customer base in order to declare the income received by said taxpayers, directly or indirectly, to the US tax administration, thereby enabling an automatic reconciliation with their individual tax returns. The tax transparency objectives have been achieved by generating a tax report filed at national level and sharing tax information between partner countries on the basis of existing bilateral tax treaties and inter-governmental agreements (IGAs). The Volcker Rule does not offer a clear definition of a covered fund; it establishes a prohibition in principle to deal with hedge funds or private equity funds, and provides a (1) list of exclusion criteria based on the products and/or the strategy of the fund, which make it possible to prevent this categorisation. For example, pension funds, foreign public funds, property acquisition vehicles and securitisation funds do not fall into the covered funds category. Including the European blacklist. (2)