How LEIs Benefit Cross Border Payments

Keeping tabs on all the necessary components of cross border payments can be quite an arduous task. A key ingredient to streamlining this process lies in LEIs, or Legal Entity Identifiers (LEIs).

Several recent publications such as the CPMI’s report to the G20 on ISO 20022 and the Wolfsberg Group’s update on payment transparency standards have recently highlighted the benefits of the LEI, a globally accepted identifier and ISO standard, in relation to cross border payments (CBPs). A common theme in these reports is that through widespread adoption, the LEI can support more straight-through automation of transaction processes and allow for more structured and granular data to be associated with the participants. Additionally, language in upcoming regulatory guidance continues to reference the LEI as an acceptable method of entity identification in this space, and the Financial Stability Board has already endorsed the LEI for supporting its goals to enhance CBPs.

Despite such encouragement for the use of the LEI in CBPs, there continues to be inconsistent methodology around how various jurisdictions conduct Know Your Customer (KYC) onboarding, risk monitoring and invoice reconciliation. Additionally, the data provided to those researching participants in these processes is not always available in a freely accessible or structured format. To help standardize these routine processes and achieve more efficiency in terms of both time and cost, regulations for these operations can incorporate the LEI so participants know this tool is available to them.

Another key benefit to using LEIs for CBPs is regular maintenance and upkeep of entity data related to the identifier. For example, if an entity has a change of legal address or legal name, this information is regularly updated through an annual renewal process or by notifications from the entities themselves, which are then verified by LEI issuers that manage the identifiers. Essentially, LEI issuers take on the burden of ensuring updated entity details. This gives firms confidence that the reference information they need for CBP activities remains accurate. As an additional confidence point, LEIs come in an openly available data set, giving transparency to all parties involved in a CBP transaction.

As both regulators and organizations better understand the universality and reliability that LEIs offer global markets, we expect the impact and acceptance of the identifier to increase in the future. As the current largest manager of LEIs globally, Bloomberg continues to work alongside the Global LEI Foundation in their promotion of the LEI in the CBP space and in other relevant use cases. Further adoption and innovation of this identifier is a significant benefit to the global financial ecosystem.

To learn more about Bloomberg’s LEI service, please visit the FAQ page. To contact Bloomberg’s experienced global support team, please reach out to: lei-support@bloomberg.net