V2.31, July 2014

The Global Financial Passport

New Global Markets

David Nordell david@newglobalmarkets.com

+972 (52) 245-8201+44 (79) 8879-2163

1Copyright © New Global Markets Limited

Our mission

To become the international standard for Trusted Identity.

To achieve this, we are creating a global customer identification and

trust management infrastructure that will allow financial institutions

— and other high-risk businesses — to protect themselves from

money launderers, terror financiers and fraudsters, and at the same

time make it easy for honest customers to do business anywhere

freely and to protect their good name and privacy

…and to become the SWIFT of Trusted Identity.

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Company founders

David Nordell, Founder/CEO: 30 years financial & technology journalism, economic & technology consulting, previous start-ups; founding member of only professional blog on terror financing; opinion leader on counter-terror finance, identity & cyber security.

Silvano Stagni – 30 years managing financial technology projects for Citibank, ABN-Amro, Sumitomo, Mondex & others; technology advisor to UK-based VC funds; City of London financial regulation consultant and opinion leader.

Richard Barr – 25 years banking & banking technology; Fundtech project manager for Citibank internal payments system; senior consultant on Bank of Israel national payments system; int’l banking consultant & trainer.

Ziv Levy – 25 years experience in IT infrastructure, integrating highly secure enterprise IT systems, including Israeli intelligence agencies & banks

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The rest of the team

• Key experts:– Former deputy head, UK Financial Intelligence Unit– Former head, strategic intelligence, UK Financial Intelligence Unit– Former senior terror finance investigator, Metropolitan Police Special

Branch– Former global business process change lead at Citi & HSBC– Former business process architect at Citi– Former specialist financial crime lawyer at UK financial regulator

• Advisory board:– Former chairman of Ernst & Young global financial industry consulting– Former strategic advisor to management board of UBS– Former senior UN Security Council official responsible for international

anti-money laundering/counter-terror financing policy

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What pain are we solving?

• International anti-money laundering & counter-terrorism finance regulations create massive regulatory burden, cost, inconvenience for financial institutions and their customers

• Financial institutions have to identify each new customer (‘Know Your Customer’) even if previously identified by other institutions

• System prone to fraudulent and inaccurate ID information, unable to prevent multiple personal identities

• High risk of fines for poor customer identification and other AML/sanctions breaches: now up to $8.9 billion for BNP Paribas!

• Even lawyers, accountants, real estate brokers in many jurisdictions have to identify clients

• Customers have to waste time on ID process with every new financial institution

• Difficult to open accounts cross-border• Inaccurate customer ID makes financial crime investigation more difficult,

especially cybercrime• ‘Know Your Customer’ is a pain for everyone, full of holes

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KYC is not only about preventing money laundering & terror financing

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KYC

Fraud

Credit Risk

Bribery & Corruption

Sanctions

FATCAMiFID

Market Abuse

Single Customer

View

Reputation Risk

How do we solve the problem?

• Secure federated identity infrastructure implemented at financial institutions– Identification process is carried out by institution’s staff at their

branches• Identify every customer once only, give a global unique ID in a

whitelist that can be relied upon by any financial institution within the global network

• Combination of biometric and other technologies to provide strong security against identity fraud

• Implemented as SaaS, provisioned through secure private cloud– Easily used by small institutions and on-line ones without physical

branches, as well as global institutions• Unequivocal, unforgeable customer ID makes it easier to manage

all areas of customer risk and also investigate financial crime

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The market for AuthentIdent: combined B2B, B2C• Corporate clients (B2B) – need to identify their customers

– Banks & other financial service institutions– Telecomms carriers, gaming & gambling– E-Commerce– Other regulated industries (law, accounting etc.)

More than 100,000 regulated businesses in UK alone; more than 300,000 in EU market

• Retail customers (B2C) – need to be identified– Individual customers of banking & other clients– Business customers

400 million individuals, 74 million registered businesses in EU alone

• Sales are all B2B or B2B2C

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How big are the biggest European banks?

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Representative Sample

Global Customers

Countries

Santander 102 million 40+

HSBC 89 million 85

ING 85 million 45+

Credit Agricole 49 million 70

Barclays 48 million 50+

Unicredit 40 million 22

Kommerzbank 15 million 50

International banks based in European Union member states. Latest available figures: various sources

Why will banks pay for AuthentIdent?

• Increasing regulatory pressure, complexity and penalties– New European regulations include future 4th Money Laundering

Directive, Market Abuse Directive, MiFID II, European Market Infrastructure Regulation as well as new data protection, cyber regulation

– All the regulations impose new, high-cost technology burdens– Internal development projects hampered by high costs, duplication of

effort, poor internal communications– Most new regulations rely on better customer identity intelligence– Regulatory penalties for AML breaches have reached $1.9bn (HSBC)

and still moving upwards, including possible criminal charges & licence suspension

• Rapidly increasing cyber and other fraud– Fraud & data breach are greatest threat to institutions’ reputation– Solutions need more reliable and more secure customer identification– Payment counterparties need to be authenticated in real time

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Revenue Model

• Annual B2B subscription from member institutions – If carrying out customer identifications, based on per-seat model– If just onboarding or authenticating customers identified elsewhere,

based on flat fee plus number of customers– Integration costs borne directly by institutions– Priced to be competitive with current Know Your Customer solutions

costing $2-5mn annually for medium-sized banks• Annual B2C subscription from individual & corporate customers

being identified– Initial fee for acceptance by system– Annual renewal fee to keep digital identity in force– Expected to be $20-40/year for individuals, $100-200 for corporates

• Gross revenues forecast to exceed $400mn/year by Year 5 after launch

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The key issues for banks & customers: compliance + reputation

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inside=

Convenient, frictionless customer acquisition

Gold-standard regulatory compliance

ID fraud protection for customers

Brand enhancement

Why will this be an excellent business?

• Expanding market– Growing world population with increasing needs for financial services– Growth of financial industry in less-developed countries

• Recurring and predictable revenue– All customers (B2B, B2C) pay annual subscription to keep service– The service itself is ‘sticky’ for both B2B, B2C customers

• Clear business need – AML and other financial regulations are only getting more difficult– Financial crime risks will continue to get more complex– KYC is essential foundation for all areas of client risk management in financial

industry and other e-commerce, not only for AML• Growing margins

– SaaS implementation costs grow more slowly than volume of users or traffic– Customer acquisition and support costs fall as system scales towards market

standard• Customer retention

– Network effects and value of data in AuthentIdent system will make it more difficult to abandon in favour of possible competitors

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Why is our timing right?

• Increased regulatory pressure on financial industry: 2014 expected to be even worse– More and bigger fines; prison sentences in future for senior bank executives?– More reputation damage

• Financial industry already recognises need for better AML/KYC solutions– HSBC planning to invest $700mn+ in completely new KYC check of all customers

• Increased pressure on financial institutions to rationalise IT systems, develop collaborative IT solutions, cut costs

• Growing acceptance in financial industry of cloud-based IT solutions• Increased public interest in customer-centric identity solutions

– US and UK governments starting private-sector alternatives to national ID cards• Rapid growth of Internet- and mobile-based financial, e-commerce services

that can’t use face-to-face KYC• Constant news focus on cyber threats has increased anxiety about fraud &

financial crime risks, both in financial industry and general public• SWIFT, HSBC, Thomson Reuters announce plan to build central

KYC repositories for corporate, investment banking clients: validates need for a central KYC platform

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How do we then transform the sales model into a viral one?

Customers will gravitate towards institutions & other businesses offering the greater convenience & flexibility of one-time KYC process

Financial institutions will want to enjoy network effects of pre-identified customers, intelligence system with lots of valuable data that can reduce their customer risk

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Current competition

• No company offering any trusted global ID solution either to financial institutions or to mass customer market

• All current KYC products are ‘me-too’ with similar functionality: the innovation is all in transaction monitoring and analysis

• Dozens of competing technology providers in highly fragmented market

• Lots of M&A activity, with niche players purchased by larger companies such as Oracle (iFlex), NICE (Actimize), Fiserv (NetEconomy), BAE (Norkom), ThompsonReuters (GoldTier)

• Other leading competitors include SAS, Sungard, Tata Consulting, Equifact, STB, Dun & Bradstreet, but mainly focused on transaction monitoring rather than KYC/client due diligence

• No clearly superior products: competition based on perceived benefits, selling strengths, TCO, strategic relationship with integrators

• Some indirect competition from start-ups (see following slide)• SWIFT’s and ThompsonReuters’ recently announced KYC utilities

are for interbank KYC, not customer onboarding

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Why will it be difficult to compete with AuthentIdent?• Complex and difficult regulatory processes:

– Financial regulators, for AML compliance– Data protection regulators– Data security

• Solution designed to scale globally into a de facto market standard

• Network effects• First mover advantage for retail banking KYC as a central

utility• IP protection• Financial industry trend towards shared solutions: deters

competing standards• Strong multi-disciplinary team with outstanding domain

expertise

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How are we already acquiring initial B2B prospects?

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Direct contact with key decision-makers in financial institutions (MLROs, heads of fraud, etc.)• Speaking at professional

conferences• Participating in

professional conferences & workshops

• Team members’ existing personal networks

Strong presence on LinkedIn• Thousands of AML & fraud

professionals active on specialist LinkedIn groups

• On-line contacts » Direct e-mail conversations » Face-to-face discussions

• Develop value proposition for qualified prospects• Sign up qualified prospects to Letter of Intent for

collaborative development of prototype »» beta (MVP) »» public launch

Long-term strategy

• Expand market to non-EU countries with clear need• Expand functionality of core product, add product spin-offs

for financial industry• Alliances with synergetic companies in financial & security

technology, including transaction monitoring for AML & anti-fraud

• Aim for market dominance as de facto standard for KYC• Build our brand as the globally trusted ‘identity bank’• Ramp up revenues• Don’t even consider exit until net revenues reach €100mn• Exit through IPO or sale to consortium of financial

institutions, but founders remain in management

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What are our barriers to competition?• Complex and difficult regulatory processes:

– Financial regulators, for AML compliance– Data protection regulators– Data security (ISO27001 and other standards)

• Solution designed to scale globally into a de facto market standard

• First mover advantage• IP protection• Financial industry trend towards shared solutions: deters

competing standards• Strong multi-disciplinary team with outstanding domain

expertise

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PUBLIC

LAUNCH

Expected development cycle

PreparationPrototype

Development

Beta Testing & Dev’t to

Launch

Prototype Test & Beta

Dev’t• Recruit VP R&D,

initial dev’t team

• New patent applications

• Initial legal agreements

• Organise office facilities & infrastructure

• Select development tools

• Build out initial web site

• Do specific use-cases & requirements with initial clients

• Validate initial business rules & processes

• Develop interfaces with external technologies & data sources

• Rapid prototyping development of remaining code

• Initial GUI• Initial mobile

apps• Recruit further

developers

• Install test systems at client locations

• Run test ID processes with simulated clients

• Validate test scenarios

• Do gap analysis for beta dev’t

• Recruit sales & marketing team

• Upgrade business rules & processes

• Add data sources

• Code beta• Set up servers

for beta• Add patent

applications

• Add more beta clients

• Start real customer enrollment processes at partner banks

• Code & roll out customer service platform, including mobile apps

• Build interface for secondary enrollments

• Obtain regulatory approvals for public launch

• Build final client & public web sites

4 months 6 months6 months2 Months

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For further information

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David Nordell CEO, New Global Markets Ltd.david@newglobalmarkets.com+44 (79) 8879-2163Skype: ngm_david