Need for security
During the COVID-19 pandemic we have seen a number of developments within the LEI and identity industry. Firstly, the importance of the industry has not only been increased, but the comprehensive need for a more secure digital identity became more apparent.
Fraud cases have risen exponentially since the beginning of March. Online hackers are looking to take advantage of companies working from home as they struggle to adapt to lockdown and seek to implement new processes and payment procedures.
Over £16m has been lost in the UK due to online shopping fraud since the onset of COVID-19. There has also been a 33% surge in attempted cases of financial fraud. The bulk of these were in the asset financing sector, an area which has already been identifier as one that can benefit greatly from adopting an LEI check as a part of their customer onboarding KYC processes.
Banking is another area which can benefit greatly, as has been highlighted in recent research conducted by McKinsey. Fraudulent credit card and loan applications can be easily detected by linking the applicant to an LEI, or if one has not been yet obtained it can raise a question mark.
This greater need for security can be clearly seen in the below chart. The only FinTech clusters which benefitted during lockdown were security related.
IRDAI asked not to sanction loans without an LEI
In light of the above developments, some regulators and financial institutions are turning to the LEI to add an extra layer of security to their internal validation processes.
The Insurance Regulatory and Development Authority (IRDAI) of India has asked insurers not to grant loan renewals or amendments if the borrowers have not been identifier by way of a Legal Entity Identifier before 30th June 2020.
The IRDAI also asked the insurers to advise their corporate borrowers with a large exposure score to obtain an LEI number by mid-Summer.
In a circular released by the IRDAI, the LEI Code is to be stored in their records and specify the same while reporting the transactions executed with such corporate borrowers.
You can find the circular here.
ING Banks develops method of identifying transactions using LEIs
In October 2018 the Financial Action Task Force expanded its AML Mandate to include VASPs. This mandate is known as the Travel Rule Protocol.
The Netherlands based lender ING Bank, developed a protocol to assist with the Financial Action Task Force (FATF)'s Travel Rule, as a part of its AML mandate. This will now allow VASP (virtual asset service providers e.g Coinbase) members a way to query for the existence of address entries which will be defined by a PKI (Public Key Infrastructure) and Legal Entity Identifier (PKI). This will allow the secure tracking of digital asset transfers such as cryptocurrency.
The solution has already been supported by large corporations such as Standard Chartered Bank and Fidelity Digital Assets.
Malcolm Wright, head of the AML working group at Global Digital Finance suggests that the LEI (which could be used in conjunction with Mifid II) could be used when issuing a VASP code to all market participants.
Please see CoinDesk for more information.
GLEIF open US based office
According to the press release issued, they have made the move across the pond in order to increase their 'on the ground' engagement in operations in the USA, the country with 13% of all LEIs and the lions share of issued Legal Entity Identifiers.
This will serve to enhance their main goal of educating industry members on the importance of the LEI System and increasing voluntary adoption rates of the Legal Entity Identifier.
The initiative will be headed by Karla McKenna of GLEIF and will be joined by Peter Warms, formerly of Bloomberg.
GLEIF’s new US office brings us closer to our stakeholders in this important market at this critical time. LEI issuance in the US is the highest across all countries globally, and we recognise the importance of accessible and engaged GLEIF resources on the ground to help drive LEI issuance beyond regulation. This is especially important as we seek financial institutions globally to partner with us on pilot programs, to trial wider LEI adoption and to work with us in exploring how financial services firms can become active participants in LEI management. Our move into North America sends a clear message to our banking industry stakeholders in the region: GLEIF is here to help the sector benefit from broader LEI integration across business banking lines. We are here to assist you.” - GLEIF
If you would like to add an extra layer of security to your KYC process, start using the LEI search tool today. It is the perfect addition to any internal organisational process which involves identity checks. The tool is free to use and the data is global, reliable and up to date!
Below, we outline why you should start using it today, and how to make the most of it.
The global LEI system has innumerous benefits to the global economy. The Legal Entity Identifier provides unique, standardized data on companies trading all around the world. The most important feature of the LEI data is that it is stored in an easily accessible, public database that you can begin using, today!
The GLEIF search tool is not just used by regulators, or financial institutions for reporting and compliance obligations. The beauty of the LEI is that any company can easily integrate an LEI check as part of its KYC processes.
The beauty of the LEI is that your company can easily integrate an LEI check as part of its KYC processes, pretty much straight away.
With over 1.7 million entities on the LEI database, you can navigate the GLEIF search tool and discover valuable information about potential clients, investors or customers.
Now, when dealing with another company, checking if they have an LEI is a sure way to know they exist and are who they say they are.
In many instances, the LEI can provide an organizational structure or parent information. For example, by looking at the LEI of Alphabet Inc, you can easily see that it owns Google and the family tree and all subsidiary entities associated with the global corporation.
How can you begin using the LEI Search tool?
GLEIF have made freely accessible the LEI search tool. This tool allows you to search LEI data in depth using ‘Expert Mode’.
An LEI record will provide you with basic information on any given entity such as:
To begin your search visit the GLEIF Look Up tool (link at the bottom of this page). Think of a company you have in mind, or simply navigate the database freestyle to check it out.
If your initial search does not provide your desired result, try filtering by switching on the 'Expert Mode' button in the top right corner.
Using 'Expert Mode'
Use expert mode to conduct a search by combining multiple search filters. We suggest playing around with this for a while until you get the hang of it.
Expert Mode filters include the below (all can be used in combination):
To use a random example, we will search for Limited Companies in registered since 2019 in the USA, who have the word 'services' in their name.
Understanding LEI Status
You can also view the status of the LEI code. This will tell you whether the information contained within the record is likely to be valid or up to date. If the LEI code has not been renewed recently, it may contain inaccurate data.
ISSUED: The LEI is active, and the information on the LEI record has been updated within the last 12 months.
LAPSED: The LEI has expired and the data has not been renewed. It needs to be updated.
It is estimated that by adopting searches such as this, the global banking industry could save up to $2-4 Billion in KYC checks annually.
The LEI Search adds a quick, and reliable extra layer of security to your current KYC processes.
In summary, the LEI Search tool is a very reliable and useful database that can be introduced to your team in a matter of minutes. You can include the LEI as a requirement for customers to fill out on your forms for example. If they provide an LEI, and the data is accurate, you can have peace of mind knowing that they have accountability, are who they say they are and are a company that stand behind their brand.
"No LEI, No Trade"
If you have an LEI Code, we recommend that you maintain it. It should not Lapse or it could interfere with your ability to conduct business. If a potential investor sees that you have an expired LEI, it may discourage them from engaging in business with you. It could also result in your banking or financial institution blocking trades, or your regulator preventing the settlement of securities.
We are here to help...
LEI Search Tool Link
The GLEIF LEI checker is the official, fastest, & most accurate way to check on the current status of any LEI.
Global financial markets are in turmoil with the closing of businesses brought on by the COVID-19 crisis. Usually, a terrible situation such as this would inevitably lead to a severe economic downturn.
This is the case during and after this pandemic, moreover, we are now made confront another fact; global monetary policy over the last decade and how this effect by an economic downturn.
Since the Global Financial Crisis of 2008, central banks throughout the world such as the Federal Reserve, the European Central Bank (ECB) and the Bank of England utilised ever-increasing Quantitative Easing (QE) systems as a means to securing the the global economy against threats.
These systems brought about an upturn in the global money supply, a huge reduction in interest rates and protected financial institutions from the looming threat they would otherwise be facing due to becoming over-leveraged.
At a glance, the global economy recovered as businesses picked up the broken parts and began again, boosted by increased access to low interest rates and cheaper money.
At a policy level the central banks, reduced interest rates to almost zero. This resulted in basically disarming themselves of the weapons they would require as a means to protect against oncoming economic volatility.
Moreover, the problem that was caused by over-leveraging financial institutions led to the 2008 disaster not only remained unpacked, but was enhanced.
The main problem which remained underlying therefore grew in the background, awaiting a trigger to unleash its wrath.
That trigger is COVID-19.
COVID-19, also known as Coronavirus, is an infectious disease caused by a new type of corona virus originating in animals. The disease causes respiratory illness (like the flu) with symptoms such as a cough, fever, and in more severe cases, difficulty breathing.
At present, the world is still reeling from the direct effects of the last economic crisis. The real economy and has not yet come to terms with the economic storm that will be unleashed hereafter.
There is however, a silver lining.
Following the collapse of Lehman Bros in 2008, the G20 initiated a global ISO standard that increased transparency in global financial markets; the Legal Entity Identifier (LEI).
This identifier serves as a passport number for companies operating internationally, identifying the exact legal entity and its ownership structure, thus avoiding the confusion that reigned in 2008 when financial institutions had difficulty ascertaining their counterparty exposure in a time of economic volatility.
Regulators throughout the world have recognised the utility of the LEI as the pre-eminent identifier and a multitude of regulatory reporting mechanisms throughout the world now require an LEI. Indeed under MiFID II, the EU mandate has been described as "No LEI, No Trade".
Today, LEIs are also being matched with International Securities Identification Numbers (ISINs), rendering increased transparency for market participants by identifying the financial instruments issued by individual companies.
The world is currently facing unprecedented challenges. While peoples' health must be at the forefront of these, the financial well-being of the global system remains a critical priority.
At this time, the real utility of the LEI in delivering transparency to opaque markets will undoubtedly come to the fore.
Order your LEI now or contact us today to find out more.
There have been a number of developments across the global financial landscape in terms of regulations in recent months. With the dawn of a new decade, brings about a new era in terms financial regulations and compliance in the global market.
Below are a few of the most recent and notable developments watch as we move into Spring 2020.
Reserve Bank of India (RBI) LEI Requirements
RBI LEI Deadline - 31st March 2020
The RBI has now mandated that eligible participants are required to obtain Legal Entity Identifier by March 31, 2020.
In case of failure to obtain LEI within due date, the Bank shall not honour any kind of banking transactions of defaulting eligible participant.
This requirement refers to having an LEI in its ACTIVE state. Therefore, if you already have an LEI, you can ensure it never expires by subscribing to automatic renewals here.
LEI Requirement for SFTR Reporting
SFTR LEI Deadline - 13th April 2020
There has been a huge demand for measures to be taken to reduce risk and increase compliance requirements in this area. This stems from the need of transparency from the global financial crisis.
Market participants will be required to provide an LEI in their reports from 13th April 2020.
Currently the European Securities and Markets Authority (ESMA) is allowing a grace period of 12 months for third country issuers, but for those in the EU must ensure their LEIs are active by April 13th.
BE-10A LEI Requirement
LEI Requirement for HMDA Reporting