How the Legal Entity Identifier (LEI) is transforming sanctions and money laundering screening

2 tammikuun 2024

Money laundering remains one of the biggest threats to the global financial system. According to the Bank for International Settlements (BIS), up to US$5 trillion is laundered annually, of which less than 1% is recovered. To address this challenge, OpenSanctions, Open Ownership, and the GLEIF (Global Legal Entity Identifier Foundation) have joined forces to improve the effectiveness of sanctions and anti-money laundering screening. This collaboration relies on Legal Entity Identifiers (LEI) to efficiently allocate critical data records, especially in cross-border payments.

The role of the LEI in the fight against financial crime

The Legal Entity Identifier (LEI) is central to this initiative. The LEI is a global identification system that assigns a unique identifier to companies worldwide. This enables a transparent allocation of beneficial owners and facilitates data integration. By combining LEI data with other global identifiers such as ISIN and BIC, the partner organisations create a robust basis for efficiently identifying companies involved in criminal activities.

Integration of OpenSanctions and Open Ownership

The collaboration between GLEIF and Open Ownership has further improved the mapping to the OpenSanctions database. This initiative has also been nominated for the prestigious G20 TechSprint 2023, underlining its relevance and importance. This partnership’s added value lies in providing a comprehensive network of entities and relationships to help analysts better identify risks and target financial crime.

Secondary sanctions and enhanced screening processes

Another critical aspect of the initiative is the identification of secondary sanctions. These apply to companies where sanctioned persons own more than 50% of the company. This helps expand the network of sanctioned entities and improve screening processes in anti-money laundering (AML) and terrorist financing (CTF).

Challenges in the global financial system

Despite this progress, the global financial system faces significant challenges. Many companies struggle with inaccurate sanctions screening processes that lead to false positives. This initiative can potentially improve and address these issues by standardising and linking data sets based on the Legal Entity Identifier (LEI).

Prospects: Data standardisation and transparency

The project aims to promote data standardisation and increase transparency. By utilising the LEI code and integrating data from different sources, a more complete data set can be created, enabling companies to manage risks more effectively and monitor sanctions.

Conclusion: A strong alliance for global security

The collaboration between OpenSanctions, Open Ownership, and GLEIF shows how important well-structured, open data and standardised company identifiers are in the fight against financial crime. The use of the Legal Entity Identifier (LEI) as a central instrument in this network strengthens screening processes and increases efficiency in identifying risks.