On January 12, 2015, the IRS announced that it had opened a data exchange service for enrollment by financial institutions and countries to use for complying with a U.S. tax law.

The purpose of the data exchange service is to facilitate the exchange of information between foreign financial institutions and host country tax authorities, on the one hand and the IRS, on the other through electronic means.

Foreign financial institutions and host country tax authorities will use the International Data Exchange Service (IDES) to securely provide the IRS with information on financial accounts held by Americans, as required by the Foreign Account Tax Compliance Act, or FATCA. The 2010 law, which targets American tax evaders “hiding” money overseas, requires foreign financial institutions and other companies to report their U.S. account-holders to the IRS, or face stiff penalties.

Using the data service, which is a web-based application, the sender encrypts the data and the exchange service encrypts the transmission pathway, the IRS said. Encryption at both the file and transmission level safeguards sensitive tax information.

IRS Commissioner John Koskinen, in a statement, called the launch of the data exchange service a milestone in the implementation of FATCA. “With it, comes the start of a secure system of automated, standardized information exchanges among government tax authorities. This will enhance our ability to detect hidden accounts and help ensure fairness in the tax system” he said.

More than 145,000 financial institutions have registered through the FATCA registration system, the IRS said . The U.S. also has more than 110 intergovernmental agreements, either signed or agreed in substance, to implement the law. In cases where a country has a reciprocal intergovernmental agreement with the U.S., and it “has the necessary safeguards and infrastructure in place,” the IRS will use the exchange service to send similar information to that country’s tax authorities on accounts held in the U.S. by its residents, the IRS said.

Though the law officially took effect July 1, 2014, the IRS said in May it wouldn’t immediately enforce many of its provisions through the end of 2015 so long as firms are making a “good-faith effort” to comply. The full scope of the law doesn’t come into force until 2017. Companies say, though, they have been working to comply.

The IDES User Guide with instructions for enrolling and using the IDES can be found here. The IRS has posted Frequently Asked Questions about FATCA and IDES on irs.gov and will continue to update the FAQs as questions are received. In addition, there is a comments link on irs.gov to submit questions specifically on IDES and another for other FATCA-related questions.