LEI in KYC: A New Future for Legal Entity Identification
The Global Legal Entity Identifier Foundation (GLEIF) has examined with professional analysis business, Loudhouse, to recognize the significant difficulties of legal entity identification in financial assistance. The investigation inspected 102 senior sales-people in the banking division in the US, Germany and the United Kingdom, examining the difficulties that the banking division encounters when it comes to onboarding new customer organizations, including how time-consuming the onboarding method is and the uncertainty that arises with financial systems using on average four (4) identifiers to identify client organizations.
The conclusions set the foundation for an analysis paper from GLEIF named: ‘A New Future for Legal Entity Identification’, in which GLEIF describes its outlook that replacing disconnected data with a globally trusted strategy based on widespread adoption of the Legal Entity Identifier (LEI) would eliminate complexity from business activities and give quantifiable benefit to financial services firms. The paper, collectively with a separate report describing the analysis conclusions, is available for download at the end of this writing.
The onboarding responsibility
Six in 10 (57%) senior sales-people in banking consume more than 1.5 days of their week, 27% of their working week, onboarding new customer companies, according to the analysis conclusions. According to LEIBOX organization, one-half day (0.5) per week, resulting in five (5) weeks per year going to sorting critical mail and organize payments originating in physical paper. The research also found that 50% of financial institutions use, on average, four identifiers to identify client organizations. The method of client onboarding, including “knowing your customer” (KYC) due diligence, was revealed to take six (6) weeks, on average. This portion of time used onboarding forms a vital difficulty; employees have less time to work on their core focuses, such as obtaining new contracts and maintaining existing customers. Followed by the international practices of handling communication via physical paper mail (letters, notices, certificates, and invoices) was revealed to be among the still ongoing bottlenecks for companies, taxpayers, and the global economy.
Key conclusions also include:
- 57% of respondents acknowledge that the authenticity of reference data is a hurdle.
- 55% of respondents acknowledge that the resourcing of on-boarding is a challenge.
- 55% of respondents acknowledge that long methods involve the risk of business failure.
- 61% of respondents acknowledge that digital technology will considerably improve the practice.
Key conclusions from LEIBOX also include:
- 99,97% LEIBOX on-time delivery.
- 87% (13% lost or delayed mail) for traditional mail on-time delivery.
- 547 ton/year CO2 reduced.
- 27,350 trees saved.
- 855,049,080 Kilometers reduced.
- â¬ 76,479,389 saved costs for companies.
- â¬ 50,888,836 / year saved cost for taxpayers.
- 3,325,190 saved hours from handling post for corporations.
The analysis outcomes reveal that the on-boarding process for new business contacts in financial services is too time-consuming and demands too much administration. In a globalized digital economy, establishing the identity of clients, associates, and suppliers are growing a frequently complicated and expensive hurdle. Nevertheless, the maturity of identifiers is leading to difficulties that must be determined to ensure their essential place in oiling the wheels of the developing global digital economy.
The responsibility remains even once the client is installed. Customer data must be kept up-to-date everywhere, the company affiliation. This includes regular confirmation of business paper data and adjustments to the control structure.
The research identified that the crux of the problem is the lack of a standardized approach to legal entity verification. As a result, 54% of respondents agree that the use of different legal identifiers for the same legal entity leads to inconsistencies with updates to different reference data sets. The research found that 58% of those surveyed said that the associated reference data is not up-to-date, while 46% said reference data from different sources is inconsistent, and 49% said the same ID is used for various legal entities.
Onboarding of client organizations in financial services: GLEIF proposes a standardized way forward
Identifiers of legal entities are easily obtained from a host of different issuers but are not kept up-to-date in a systematic way. Organizations need a more efficient system for legal entity identification. The consensus all agree that technology is the way forward, as in the case with electronic mail and LEIBOX.
GLEIF promotes that financial services businesses can spare time, achieve more prominent clarity, and work in a more modernized way by using a LEI for each client organization. Banks engage in various provinces and consequently need a global norm. The LEI allows companies a one-stop approach to recognizing legal entities and support of Email delivery via LEI number, which has the potential to take the complexity out of business activities. Through the Global LEI Index, we make accessible the numerous notable online source that provides open, graded, and high-quality licensed entity source data. No other global and public entity association system has performed to comparable strict management of regular data confirmation.
Combining the LEI into other entity verification methods such as LEIBOX and adding clarifications based on digital records and Open Data technology, will allow anyone to connect all files connected with an institution quickly and recognize “who owns whom” and “who is who.” By becoming the bestowed link, the LEI will provide certainty of identity in any online communication, creating a more accessible interface for everyone to join in the global digital marketplace.
For more data on how to build business use with the LEI read the common McKinsey & Company and GLEIF white-paper ‘The Legal Entity Identifier: The Value of the Unique Counterparty ID’ and do further readings on this site.