Fraud prevention made easy: The LEI and its role in payee verification

27 December 2024

With the growing use of real-time payments and other payment methods worldwide, financial institutions face the challenge of optimising their fraud detection and identity verification strategies. The Legal Entity Identifier (LEI) offers an innovative solution to accurately and efficiently identify payees across borders. But why is the LEI an indispensable tool for payee verification?

The LEI as a universal identifier for payees

FATF Recommendation 16 and the EU Regulation on Instant Payments highlight the need to standardise the identification of payees globally. A key challenge in cross-border payments is matching names and addresses due to translation and spelling differences. The Legal Entity Identifier (LEI) offers a globally standardised solution by providing a unique, structured identifier for each payee.

Advantages of the LEI for payee verification

precise identification of the payee

The Legal Entity Identifier (LEI) enables a clear assignment of payees in payment messages. With an LEI, the receiving bank can ensure that the information in the payment message matches the payee’s account, which creates trust with customers and reduces errors.

efficient machine-to-machine communication

By integrating the LEI, each payment is supplemented with a unique identifier that confirms the payee’s identity. This speeds up the payment process, improves processing speed, and enhances the customer experience.

reduction of costs and failed transfers

Failed payments due to name discrepancies or address problems often lead to manual interventions that are expensive and time-consuming. Using the Legal Entity Identifier minimises such problems and ensures smooth payment processing.

minimisation of fraud risks

The LEI enables payment service providers (PSPs) to recognise potential risks early. Signals such as frequent name changes, suspicious address changes or detailed information on the parent company can be used as fraud indicators.

future-proof digital identity solutions

The verifiable LEI (vLEI) enables secure digital authentication and identity verification. PSPs can thus offer additional services such as digital signatures or fraud prevention solutions and better prepare for the digital transformation.

Why the LEI is crucial for the future of payment processing

Introducing the Legal Entity Identifier (LEI) into payee verification is crucial to making payment transactions more secure and efficient. Banks, payment service providers and businesses can benefit from the LEI by:

Increasing customer satisfaction through frictionless payments

Minimising fraud risks and meeting regulatory requirements more efficiently

Reducing costs while increasing the speed of payment processes.

Conclusion – creating trust and efficiency with the LEI

The Legal Entity Identifier (LEI) is revolutionising how payment recipients are verified. Its global, standardised structure offers a reliable solution for automating identity checks, preventing fraud and increasing efficiency.

Take advantage of the LEI and position your organisation as a secure and efficient payment processing leader. Contact us today to learn more about implementing LEI and vLEI in your organisation!