Hidden somewhere under his robes, presumably. It does look bulky enough around his waist to be covering it up.

And before anyone starts getting horror ideas that he's lost it somewhere along the way, there's this from the MSQ 'In His Garden':

MOREN
Aye, the Exarch has ever been one to conceal his full appearance. Although I have, on occasion, spotted what could only have been a tail...

Though given that he seems to have abandoned the "hidden identity" thing at the end of the story (having apparently been a hundred-year plot specifically to prevent us from recognising him) it would be nice if he can show his tail again too - though at a practical game-design level it might not look all that good with his robes, especially if it's been modeled with the specific thought of the tail being underneath.