Policy Conformity Flag Initiative to Increase Transparency in Global Financial Markets

The need for increased transparency across global financial markets

The global economy is wrestling with never-before-seen levels of identity related fraud. This increase in digital crime is causing financial damage globally and destroying vital trust between counterparty organizations, particularly those operating across borders and legal jurisdictions. Furthermore, financial crises have demonstrated the need for unique identification of parties to financial transactions, as well as a description of interconnections between legal entities, in order for authorities and participants to properly track financial risks.

New initiative to minimize fraud risk and increase transparency: the Policy Conformity Flag

The Policy Conformity Flag is a compelling opportunity to encourage and promote enhanced transparency in transactions via the current and complete reporting by legal entities of open, standardized, and high-quality legal entity reference data available to users. This will maximize transparency and trust among market participants.

Introducing the Policy Conformity Flag

The Policy Conformity Flag is a simple, clear tool for global data users to determine whether individual LEI records meet certain Regulatory Oversight Committee (ROC) policies. An LEI labeled as ‘conforming’ indicates the following criteria have been met (along with the related benefits):

• LEI registration is current – the LEI registration has been renewed in a timely manner.
  • Accelerate the identifiability of legal entities across global marketplaces and data-driven investing
  • Enable easier due diligence via up-to-date party information, especially for cross-border transactions
• Level 2 reporting is complete – the legal entity has reported data on its direct and ultimate parents, or provided one of the acceptable reasons for not reporting this data.
  • Advance the ability to detect and monitor risks via connections across entities
  • Easy-to-use measure of corporate transparency

By enabling closer monitoring of transaction data and supporting greater clarity in their ownership structures, entities with ‘conforming’ status demonstrate their unwavering commitment to transparency. Their conforming status also signals to partners and other organizations that their LEI can be used to reliably streamline due-diligence checks, onboarding, and other counterparty processes, making them easier to do business with. In contrast, an LEI labeled as ‘non-conforming’ demonstrates that the legal entity needs to renew and/or update its LEI record.

The Policy Conformity Flag is not a data quality indicator. In that respect, it complements the Global LEI System Data Quality Management program which evaluates the technical compliance of an LEI record with the published file formats and lifecycle rules.

The Benefits of the Policy Conformity Flag

By empowering entities to demonstrate their own commitment to transparency and ensure that their corresponding LEI record registration data is current and complete with relationship reporting, global business communities stand to realize various benefits:

• Fighting financial crime – the Policy Conformity Flag promotes increased accuracy and completeness that enable critical data sets to be more efficiently shared and matched, thereby enabling the enhanced analytics needed to detect and combat financial crime.
• Monitoring market risk – the Policy Conformity Flag enables easier detection of interconnections and supports the analytics needed to monitor risks in financial markets.
• Enhancing Operational Processes – the Policy Conformity Flag enhances transparency of policy compliance relevant to operational processes, including more timely analysis. This reduces transaction failures, lowers dataset connectivity, reconciliation, cleaning, and aggregation costs; and trims reporting costs.

Entities are encouraged to take action to ensure their LEI conforms with the ROC policies in the Global LEI System. Importantly, an LEI labelled as ‘conforming’ is a simple, elegant way for entities to ensure basic compliance with myriad international regulations.

Accessing the ROC Conformity Flag

The Policy Conformity Flag initiative consists of two main components. An interactive dashboard demonstrates conformance levels across the globe, supporting data quality management in the Global LEI System in a proactive and transparent manner.

Information is also included within LEI search details, GLEIF Golden Copy Files, and GLEIF API to enable data users to easily identify whether an individual LEI record conforms to ROC policies.