Phase 1 ISO 20022 Preparation for Fedwire® Funds Service (FAIM 4.0)

Intermediate Webinar

Federal Reserve Banks November 9, 2017 (Revised December 13, 2017)

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Logistics

Dial-In: 1-888-625-5230 Participant Code: 6016 0104#

Webinar Link:

https://www.webcaster4.com/Webcast/Page/577/21362

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Agenda

Overview of ISO 20022 phased implementation approach

ISO 20022 implementation timeline

Rationale for Phase 1 changes

Overview of changes included in Phase 1

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ISO 20022 Implementation Approach

• “Big bang” implementation to accommodate SWIFT MT changes to originator and beneficiary fields and to prepare for and simplify the Fedwire Funds Service’s migration to ISO 20022 messages.

Phase 1 Legacy format changes

• Migrate Fedwire Funds Service participants in waves over 18 months to send and receive ISO 20022 messages that have fields and character lengths that are comparable to the legacy format.

• The Fedwire Funds Service will translate the legacy format to ISO 20022 and vice versa when necessary to accommodate Fedwire senders and receivers that are not using the same format.

• The Fed will sunset legacy format at end of this phase.

Phase 2 ISO Like for like

• “Big bang” implementation to enable participants to send optional enhancements.

Phase 3 ISO Enhancements

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ISO like for like

Fedwire (18 months - begins in Q1 2022)

Legacy Changes

November 23, 2020

ISO Enhancements

Q4 2023

2020 2022 2023

Fedwire Stability Period

(3 months)

ISO 20022 Implementation to be Completed by the end of 2023

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Phase 1 ISO Preparation (FAIM 4.0) Rationale

Prepare for and simplify the ISO 20022 implementation by “cleaning up” the legacy format.

Better align with existing SWIFT MT messages.

Accommodate November 2020 SWIFT MT changes to originator and beneficiary fields.

Align with globally agreed High Value Payment System Plus guidelines for ISO 20022 messages.

Improve the straight-through processing of IRS tax payments.

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Format Version Changes Eliminate Interface Data Change the maximum message length to reflect the FAIM 4.0 format Change the Format Version from “30” to “40” in the following tags:

Tag {1100} Message Disposition Tag {1500} Fedwire Sender-Supplied Information

Note: When the FAIM 4.0 release is implemented, same-day retrievals will be supported. However, the following changes will impact prior-day retrievals the first 2 business days:

On Monday, November 23, 2020, prior-day retrievals will not be supported for November 19 or November 20.

On Tuesday, November 24, 2020, prior-day retrievals will be supported for November 23, but not for November 20.

Fedwire Funds Service participants should implement internal procedures to save copies of all messages sent or received on November 19 and 20, 2020, before FAIM 4.0 goes live.

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{1500} Fedwire Sender-Supplied Information URC Element

Tag {1500} Fedwire Sender-Supplied Information change Eliminate User Request Correlation (URC) element in payment message

and associated acknowledgment and reject notification, because the IMAD can be used as a unique identifier.

URC will be retained in inquiry messages and associated response messages: Account Balance, Endpoint Totals, Error Code Description, Detailed Summary, and Retrievals.

URC will be retained (populated with spaces) for broadcast messages and Fedwire Funds Service Subsidiary Statements.

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{1510} Type and Subtype Codes

Eliminate the following type codes: Type code 10 in BTR messages (i.e., bank transfers and cover payments) Type code 16 in CTR messages (i.e., customer transfers)

Eliminate the following subtype codes:

Subtype code 07 (return request of a prior day message) for all messages ‒ Subtype 01 should be used regardless of the date when the original funds transfer was sent

Subtype code 08 (return of a prior day message) for all messages

‒ Subtype 02 should be used to return funds regardless of the date when the original funds transfer was received

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{3600} Business Function Code

Eliminate the following business function codes in {3600} CKS (Check Same Day Settlement) DEP (Deposit to Sender’s Account) FFR (Fed Funds Returned) FFS (Fed Funds Sold) DRB (Bank Drawdown Request) and DRC (Customer or Corporate

Drawdown Request) ‒ Replaced with DRR (Drawdown Request)

CTP (Customer Transfer Plus) ‒ Change CTP COVS to BTR COVS ‒ CTR to be used for all customer transfers

Refer to Appendix A for valid combinations of business function codes and type/subtype codes.

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{3500} Previous Message Identifier

Mandatory for: Return request (i.e., SVC with subtype 01) Return (i.e., BTR or CTR with subtype 02) Drawdown refusal (i.e., DRR with subtype 33)

Optional for:

Service message (i.e., SVC with subtype 90)

For all other messages, tag {3500} is not permitted.

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{3620} and {4320}

Tag {3620} Payment Notification Add new element 08 Unique End-To-End Transaction Reference (UETR)

Tag {4320} Reference for Beneficiary

Mandatory for BTR messages

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{6100} through {6420}

Eliminate the following {6xxx} tags*: {6100} Receiver FI Information {6110} Drawdown Debit Account Advice Information {6200} Intermediary FI Information {6210} Intermediary FI Advice Information {6300} Beneficiary’s FI Information {6310} Beneficiary’s FI Advice Information {6400} Beneficiary Information {6410} Beneficiary Advice Information {6420} Method of Payment to Beneficiary

*Information previously included in tags {6100} – {6420} can be provided in {6500}, which can be up to 6 lines of 35 character each.

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Changes to Party Fields

Tags {3100} Fedwire Sender and {3400} Fedwire Receiver Eliminate Short Name element

Added new tag {4210} Option A/F for CTR and Drawdown messages To mimic SWIFT MT field options 59A/59F

Significant changes made to all of the other party fields: {4000} Intermediary FI {4100} Beneficiary’s FI {4200} Beneficiary {5000} Originator {5010} Originator Option A/F {5100} Originator’s FI {5200} Instructing FI

Refer to the FAIM 4.0 document for complete details. Key changes highlighted below: Replace existing Identifier element with two new elements: Identifier BIC and Identifier Other Allow ID Code “T” to enable the use of an account number with a BIC When ID Code is “B” or “T”, the SWIFT BIC must be 8 or 11 characters New ID Code “N” replaces a space to indicate there is no ID Code

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{4210} Edits for IRS Tax Payments

IRS tax payments will be identified using ID Code “6” in tag {4210} and the following edits will be applied:

Element Tax Payment Field Tax Payment Edit in Tag {4210} 01 – ID Code N/A Must be “6” when {3400} is one of the Treasury tax payment RTNs;

otherwise, ID Code “6” is not permitted 02 – Identifier BIC N/A Not permitted 03 – Identifier Other Tax Identification

Number (TIN) Must be 9 numeric characters (no alpha, spaces, or special characters) and must not be "999999999" or "000000000"

04 – Name Taxpayer Name Must begin with 1 followed by a slash “/” and then followed by at least one valid nonspace character

05 – Line 1 Tax Type Code Must begin with 1 followed by a slash "/" and then followed by 5 alphanumeric characters, but no spaces or special characters are permitted

06 – Line 2 Tax Year Must begin with 1 followed by a slash "/" and then followed by 2 numeric characters

07 – Line 3 Tax Month Must begin with 1 followed by a slash "/" and then followed by "00" or a valid 2-digit month

Example of tag {4210} message: {4210}6*123456789*1/NORTHLAND ELECTRONICS*1/9410B*1/17*1/06*

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Charges

Tag {3700} Charges changes Required for CTR messages Add new charge code: “O” (OUR) in element 01 Details of Charges Element 02 Senders Charges 1 is required with B and optional with S and O Market practices (e.g., SWIFT gpi, Fedwire convention for remittance

transfers subject to section 1073 of the Dodd-Frank Act) and bilateral agreements may dictate how charge code “O” should be used

As a best practice, use “S” in element 01 if there are no charges Tag {3710} Instructed Amount changes

Required if {3700} element 02 Senders Charges 1 is present

Tag {3720} Exchange Rate changes Required if {3710} is present and element 01 Currency Code is not USD;

otherwise, not permitted

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Remittance Information

For customer transfers Eliminate tag {8200} Unstructured Addenda Information. Eliminate the X12 and MX character sets that were permitted only for tag {8200}. Only permit one of the following options for remittance information:

‒ Unstructured (i.e., {6000}) ‒ Related (i.e., {8250}) ‒ Structured (i.e., {8300} through {8750})

Structured remittance information tags: ‒ Eliminate {8650} Related Date (i.e., moved to tag {8400} in new element 05) ‒ Restructured elements within tags to align with ISO 20022 messages ‒ Changed the edits related to repeated versus nonrepeated tags

For bank transfers

{6000} Originator-to-Beneficiary Information not permitted in BTR messages

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Drawdowns Key Changes to Drawdown messages: DRB and DRC will be replaced by DRR (drawdown request) with type codes 16 and 10, respectively {4200} Beneficiary will be replaced by {4210} Beneficiary Option A/F {4400} Account Debited in Drawdown and {5000} Originator will be replaced by {5010} Originator Option A/F Eliminate unnecessary tags (refer to FAIM 4.0)

Tags permitted for Drawdown messages:

Note: Information that was previously included in tag {6500} can be included in tag {6000}.

Drawdown Request (DRR subtype 31) Drawdown Transfer (DRW subtype 32) Drawdown Refusal (DRR subtype 33) ‒ {1500} Fedwire Sender-Supplied

Information ‒ {1510} Type/Subtype Code ‒ {1520} IMAD ‒ {2000} Amount ‒ {3100} Fedwire Sender ‒ {3320} Fedwire Sender Reference ‒ {3400} Fedwire Receiver ‒ {3600} Business Function Code

(Element 01) ‒ {4210} Beneficiary Option A/F ‒ {4320} Reference for Beneficiary ‒ {5010} Originator Option A/F ‒ {5400} Account Credited in

Drawdown ‒ {6000} Originator-to-Beneficiary

Information

‒ {1500} Fedwire Sender-Supplied Information

‒ {1510} Type/Subtype Code ‒ {1520} IMAD ‒ {2000} Amount ‒ {3100} Fedwire Sender ‒ {3320} Fedwire Sender Reference ‒ {3400} Fedwire Receiver ‒ {3600} Business Function Code

(Element 01) ‒ {4210} Beneficiary Option A/F ‒ {4320} Reference for Beneficiary ‒ {5010} Originator Option A/F ‒ {6000} Originator-to-Beneficiary

Information

‒ {1500} Fedwire Sender Supplied-Information

‒ {1510} Type/Subtype Code ‒ {1520} IMAD ‒ {2000} Amount ‒ {3100} Fedwire Sender ‒ {3320} Fedwire Sender Reference ‒ {3400} Fedwire Receiver ‒ {3500} Previous Message Identifier ‒ {3600} Business Function Code

(Element 01)

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Cover Payments

Renamed business function code {3600} for cover payments Rename CTP COVS to BTR COVS to align with SWIFT MT 202 COV

Tag {3610} Local Instrument changes

Permitted only for cover payments (BTR COVS) For element 01, only code permitted is “COVS”. All other codes are

eliminated (i.e., ANSI, GXML, IXML, NARR, PROP, RRMT, RMTS, S820, SWIF, and UEDI).

Eliminate element 02 Proprietary Code

{7xxx} tags changes Permitted only for BTR COVS messages Correct length in element 01 SWIFT Field Tag Require element 02 Line 1

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Service Messages For SVC subtype 01 messages

All return requests should be done using subtype 01 in SVC messages. Reason code must be provided in {6500}.

Do not permit type/subtypes 1033 & 1633 in SVC messages

To refuse a drawdown request, type-subtypes 1033 & 1633 should be used with DRR messages. For SVC subtype 90 messages

Increase the length of tag {9000} to 1,750 characters.

Tags permitted for SVC messages:

Return Request (SVC subtype 01) Service Message (SVC subtype 90) ‒ {1500} Fedwire Sender-Supplied Information ‒ {1510} Type/Subtype Code ‒ {1520} IMAD ‒ {2000} Amount ‒ {3100} Fedwire Sender ‒ {3320} Fedwire Sender Reference ‒ {3400} Fedwire Receiver ‒ {3500} Previous Message Identifier ‒ {3600} Business Function Code (Element 01) ‒ {6500} FI-to-FI Information

‒ {1500} Fedwire Sender-Supplied Information ‒ {1510} Type/Subtype Code ‒ {1520} IMAD ‒ {3100} Fedwire Sender ‒ {3320} Fedwire Sender Reference ‒ {3400} Fedwire Receiver ‒ {3500} Previous Message Identifier ‒ {3600} Business Function Code (Element 01) ‒ {9000} Free-Formatted Text

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Returns

In a return message, basic payment information and the parties involved in the return payment must be present (subtype 02).

The following tags are not permitted:

{3600} Business Function Code (Element 02) {3610} Local Instrument (except BTR COVS) {3700} Charges {3710} Instructed Amount {3720} Exchange Rate {5400} Account Credited in Drawdown {6000} Originator-to-Beneficiary Information All {7xxx} tags All {8xxx} tags {9000} Free-Formatted Text

Refer to the FAIM 4.0 document for complete details

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ISO 20022 Documentation

November 2017 (Final)

December 2017 (Draft) June 2018 (Final)

Same as Phase 2

Fedwire Funds Service

Legacy Format Changes

ISO 20022 like for like

ISO 20022 enhancements

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Description Audience Date Intermediate Phase 1 Review of Phase 1 (FAIM 4.0) changes and timeline

Product managers Business contacts Technical leads (application development/business analysts/QA leads)

November 9, 2017 90-minute webinar (recorded) Q1 2018 Drop-in call to address questions

Intermediate Phase 2 & 3 (Prerequisite for Advanced Session) Review of Phase 2 scope, introduction of ISO 20022 usage guidelines, “rulebook,” and message flow diagrams; initial thoughts on migration approach and testing plan; overview of Phase 3 enhancements

Same as above Q1 2018 90-minute webinar (recorded)

Advanced High-level overview of content covered in Intermediate session; detailed walk-through of Phase 2 & 3 ISO 20022 usage guidelines

Technical leads (application development/business analysts/QA leads)

Q2 2018 All-day in-person sessions at FRB New York, Chicago & San Francisco

Future Educational Opportunities To register for future education sessions, see https://www.frbservices.org/resources/financial-services/wires/iso-20022-implementation-center.html

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Business Function Code Description Type/Subtype* Value Messages

BTR Bank Transfer (Originator and Beneficiary are each depository institutions)

1500, 1600 (transfer) 1502, 1602 (return)

BTR (Cover Payment)

Bank Transfer (Cover payment)

1500, 1600 (transfer) 1502, 1602 (return)

CTR Customer Transfer (Originator and/or Beneficiary are not depository institutions)

1000, 1500 (transfer) 1002, 1502 (return)

DRW Drawdown Transfer 1032, 1632 (transfer) Nonvalue Messages

DRR Drawdown Request 1631 (bank drawdown request) 1633 (bank drawdown refusal) 1031 (customer drawdown request) 1033 (customer drawdown refusal)

SVC Service Message 1501, 1601 (return request) 1590, 1690 (service message)

Appendix A – Valid combinations of business function codes and type/subtype codes

*Type code 15 is a funds transfer that can be sent only to/from prescribed accounts at the Federal Reserve Bank of New York (generally accounts for foreign central banks and international organizations).

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Notices

The Federal Reserve Banks do not sponsor, endorse, or recommend (or provide any warranties, express or implied, regarding) any third party or any third-party products or services referenced in this presentation. The Financial Services logo, the Fedwire logo, “Fedwire,” and “Wired to Deliver” are registered or unregistered service marks of the Federal Reserve Banks. Other trademarks are the property of their respective owners.

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Questions

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