Enhancing LEI Data Quality and Trustworthiness

The new LEI Conformity Flag will enhance universal trust in LEI data 

The new LEI Conformity Flag was introduced during a webinar in April 2020. It is set to be implemented throughout 2021 and is still undergoing testing and prototyping.

The quality of LEI data is of critical importance to the integrity of the global LEI system. It remains the only global legal entity identifier that publicly shows a record of when the data was last updated. The Financial Stability Board (FSB) have stated that the LEI system should promote a “higher quality and accuracy of financial data overall”.

What is an LEI? The LEI is essentially an international business passport, which identifies your company and allows you to know for sure that your counterpart is who they say they are. This is why trust in the system is paramount.
 
Currently, in order for the LEI data to be deemed trustworthy it requires annual renewal. If an LEI is allowed to ‘Lapse’ it will be marked as lapsed on the public LEI database meaning the data has not been checked in the last 12 months rendering it outdated.
 
But if an LEI is active, how can we still be sure the data is accurate? 

GLEIF report 99% LEI accuracy which leaves 1% of LEIs as unsure. This is thousands of LEIs. Soon we will have the Conformity Flag to give us a second layer of data quality assurance, along with the existing LEI Status.

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The GLEIF are responsible for monitoring the LEI system and the data it contains. The thing about data quality is that it cannot be assumed, it has to be actively managed and monitored. The GLEIF are always working to improve the level of data quality in the system and we are seeing an upwards trend from their data quality reports.

GLEIF are working to reduce the rate of lapsed LEIs and build trust in the system by introducing the new concept of the conformity flag. This is a very important upgrade to the LEI system.
 
The conformity flag will be an indicator of the accuracy of an LEI record, in addition to being ‘Active’ LEI it will also contain its conformity flag.
 
The flag will serve as an indicator as to how well an entities LEI is complying with all the data quality checks. When the flag is active the LEI is in full conformity.
 
This will help indicate where an LEI needs updating, and encourage LEI owners to keep their LEI maintained.

In order to obtain a conformity flag the LEI will undergo a series of computing checks against reporting criteria ( these will be published by the LEI ROC (Regulatory Oversight Committee) in the coming months).
 
Before an LEI is currently issued, it goes through a number of criteria checks such as corroborating the data through local business registries, checking for duplicates etc – what new checks will be added remains to be seen.
 
It will be rolled out in phases, rather than immediately implemented, and over a certain time period the flag will be added to all existing and new LEIs.
 
Going forward, conducting an LEI check during KYC/onboarding processes will include a check  for the entities LEI conformity flag also.
 
The biggest impact this will have is that the already very high data quality of the system will become more trustworthy to users and future users of the database.

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For example the European Central Bank constantly evaluate the data quality of the LEI, and will welcome the addition of a conformity flag which will guarantee the data quality of any specific LEI code where a flag is present. If an entity has not been awarded a flag, perhaps the data source was not trusted, maybe there is another LEI for the same entity (duplicate) or the LEI data is not consistent with other records.
 
LEI data is public, and GLEIF issue monthly data quality reports which are generated based on 11 data quality metrics.
 
Here is the link to the data quality reports: https://www.gleif.org/en/lei-data/gleif-data-quality-management/about-the-data-quality-reports/download-data-quality-reports/download-global-lei-data-quality-report-october-2020
 
Here is the most recent October 2020 report:

You can see that the GLEIF reports 99% data accuracy. However in a database of 1.75 million this still means 17,500 LEIs may be faulty because they didn’t pass a certain check.

​How do we discern between the accurate ones and the maybe ones? The conformity flag will tell us that an LEI has passed all the checks, the data is reliable and comes from a trusted source.

It also adds an incentive to renew an LEI where an active LEI is not required. Not all LEI regulations require the LEI to be renewed/active, even though an LEI may be lapsed we will now have a secondary indicator as to the accuracy of the LEI data.

​So, if your regulator is not requiring you to have an active LEI, the lack of a conformity flag will encourage you to renew it asap.

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LEI Worldwide fully support the conformity flag project and I personally believe that when users of the database see it on an LEI record they will have assurance and trust in the system making it the single most trusted identifier for companies globally. 
 
LEI Worldwide work closely with the Ubisecure team to prioritise data quality for our clients so we expect 90%+ conformity on our clients LEIs when they are reviewed, and we will review the remaining LEIs on a continual basis to maximise conformity.