On the road to global financial transparency: the development and future of the Legal Entity Identifier System
28 noviembre 2023
In an increasingly globalised and digitally networked economy, transparent and reliable company data plays a more significant role. The introduction of the Legal Entity Identifier (LEI) system almost ten years ago has enabled a substantial change in the identification and tracking of companies on an international level. This article looks at the evolution of the LEI system and its challenges and prospects while also emphasising the relevance of LEI registration for global financial transactions.
Why the LEI system is essential for global financial transparency
A Legal Entity Identifier (LEI) is a unique code that uniquely identifies companies worldwide. The system was created in close cooperation with the Financial Stability Board (FSB) and the Regulatory Oversight Committee (ROC) to ensure standardised identification of companies involved in financial transactions. The LEI has established itself as an essential tool that helps to promote transparency in the global financial markets and strengthen confidence in international financial transactions.
The obligation to register an LEI ensures that companies participating in financial transactions are identifiable and that their activities can be tracked transparently. This is particularly important in an environment where regulatory requirements are constantly increasing and adherence to transparency and compliance requirements is becoming increasingly important.
The evolution of the Global LEI System
Since its introduction, the LEI system has made considerable progress. A critical factor in this success is the cooperation between regulators, the Global Legal Entity Identifier Foundation (GLEIF), and the various LEI issuers. This cooperation has helped improve LEI data’s consistency, quality, and reliability. GLEIF ensures that LEI registration processes are standardised worldwide to guarantee the high quality and reliability of the data.
One example of the system’s ongoing development is the ROC’s introduction of new guidelines. These include the LEI registration of investment funds, the management of corporate life events, and the storage of data histories. These initiatives have increased the depth and scope of LEI data, ultimately leading to greater international market transparency.
Data quality and use of technology to optimise the LEI system
A key element of the LEI system is the data quality management framework developed by GLEIF, which ensures the accuracy and stability of LEI data. The LEI issuers play a crucial role by verifying the accuracy of company data, including legal name, address and registration details, daily. These measures ensure that the Global LEI Index users can access reliable information.
Another step forward is the introduction of the Challenge Facility, a mechanism for correcting inaccuracies in LEI data. This mechanism promotes collaboration between financial institutions, digital identity providers, and regulators to ensure that data is always up-to-date and accurate.
Looking to the future, integrating artificial intelligence (AI) into the LEI system could lead to even better results. AI technologies could identify patterns and anomalies in the LEI data, allowing potential errors to be recognised and corrected more quickly. This would further improve the efficiency of data maintenance and facilitate compliance with ROC guidelines.
Recognition and prospects
The success of the LEI system over the past ten years was only possible with the dedicated work of the LEI issuing organisations. Their commitment to accuracy and data quality has been instrumental in making the financial ecosystem more transparent and resilient. To recognise these achievements, GLEIF has launched the GLEIF Awards. These awards are designed to encourage competition and contribute to the continuous improvement of the LEI system.
Looking to the future, the Global LEI System will continue to play a central role in promoting transparency, risk management and regulatory reporting. Ongoing collaboration between all stakeholders and the use of modern technologies such as AI will ensure that the LEI system will continue to meet the future challenges of a rapidly changing global economy.
LEI registration remains essential for companies engaged in international financial transactions. A strong and reliable LEI system is the basis for a secure, transparent, and efficient global financial landscape.
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