Transparency as a strategy: How the LEI supports companies in the fight against fraud

22 október 2024

Corporate fraud is a constant threat in an increasingly globalised world economy. The growing complexity and sophistication of these forms of fraud are challenging organisations of all sizes to make transparency and trustworthiness part of their strategic priorities. The Legal Entity Identifier (LEI) offers an effective solution to promote transparency in the global marketplace and combat crime.

The LEI is a cornerstone for transparency and trust

Corporate fraud causes financial damage and undermines trust in international trade relations. Studies such as Interpol‘s Global Financial Fraud Assessment 2024 warn that financial fraud is on the rise and poses a pervasive threat. To counteract this, every company can use the LEI, a globally standardised identification number, to create transparency and strengthen the integrity of its business activities.

How the LEI contributes to risk minimisation

With an LEI, companies can ensure that their legal identities are verified and that their ownership structures and subsidiaries are transparent. This enables business partners to recognise potential risks more quickly and make informed decisions, whether for mergers, acquisitions or cooperation with suppliers. The open availability of LEI data enables companies to identify their transaction partners throughout the entire lifecycle and make their business practices more secure.

The Policy Conformity Flag – A benchmark for trustworthiness

Introduced by GLEIF and the Regulatory Oversight Committee (ROC), the Policy Conformity Flag is a new tool that indicates the compliance and timeliness of an LEI record. Organisations with this status are considered particularly trustworthy and can thus improve the efficiency of due diligence processes and onboarding procedures. The flag provides a simple identification that helps companies comply with over 200 regulations worldwide.

Benefits of a compliant LEI for companies and the global market

An LEI with compliant status is a valuable signal of reliability. It enables companies to confirm their identity in multiple use cases and benefit from automated and optimised business processing. In addition, the increased data quality makes it easier to analyse and identify risks and detect criminal networks.

Conclusion

The Legal Entity Identifier (LEI) is far more than just a metric; it is a crucial tool for organisations to promote transparency and trust on a global scale. Every company using an LEI helps increase transparency in international business transactions and make the global economy more secure. The fight against corporate fraud starts with introducing reliable identity standards – and the LEI leads the way.