Michael Shashoua: The Ides Arrive Early

Last month’s launch of the International Data Exchange Service (IDES) by the US Internal Revenue Service (IRS) seems intended to address past complaints that the IRS was not adequately defining what would be required for compliance with the US Foreign Account Tax Compliance Act (Fatca). IDES allows firms and national authorities that have entered intergovernmental agreements (IGAs) with the IRS to securely report relevant account data. The service also lets firms securely exchange information with each other, whether they have IGAs or not.

Preceding IDES’ debut, foreign financial firms had to obtain a GIIN identification number by July 1, 2014, in countries without IGAs, and by January 1, 2015, in countries with IGAs. Next, firms must meet new annual reporting deadlines in March and September this year, raising the question of whether IDES will be sufficiently easy to navigate and functional enough to allow that to happen. Firms in markets without IGAs must report by March 31, while firms in markets with IGAs have until September 30.

Further Adjustments?
In a column last March, I asked if the IRS might have further adjustments to what had been a February deadline for having reporting processes and customer remediation in place. IDES does not reportedly include any such major changes to the substance of what firms must file and provide for Fatca compliance, so that appears settled now.

However, as Micah Willbrand, global director of anti-money laundering product marketing at Nice Actimize, points out, from a technological and operational perspective, the IDES rollout is likely to strain firms’ ability to meet the March and September deadlines. The intent behind IDES is to give firms a tool to meet the deadlines with the resources they have, Willbrand says, although it could become trial-by-fire with the first-ever annual reporting cycle, using a new, untested system.

Corporate Actions Interest
Meanwhile, as my colleagues and I prepare for this year’s Financial Information Summits, we consider whether corporate actions has enough interesting or important developments happening to warrant discussion. The question of the importance of corporate actions is particularly of interest for the North American Financial Information Summit to be held in New York in May.

IDES allows firms and national authorities that have entered IGAs with the IRS to securely report relevant account data.

Organizations like the Depository Trust & Clearing Corp. (DTCC), which has an interest in addressing corporate actions as a data management challenge, will see a lot of action happening in the field. However, because corporate actions are considered a back-office responsibility, other organizations end up seeing them as the crazy aunt in the basement—US presidential candidate Ross Perot’s term for what everyone knows is there but no one wants to acknowledge.

Part of the problem could be that the industry has gotten hung up on the sub-topic of corporate actions messaging standards, and whether a bigger swath of the industry will adopt the more advanced ISO 20022 standard. What appears to be more material, and more important to actually making corporate actions more compelling as an area to address, is growing sophistication in the number of fields included in a corporate action, and issues that could be created by discrepancies in the same data elements from different sources.

Also, increased volume and complexity ought to be sparking greater interest, just as that development did with legal entity identifiers, when their registration started driving new volumes of data to manage.

Industry professionals began speaking more about the new complexity in corporate actions last autumn, and told listeners of our October 29 webcast how this complexity will make efficiency and optimization of corporate actions processing more challenging. It remains to be seen whether it’s so challenging that it captures more interest in the industry.