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The LEI: A Swiss Army Knife for the World’s Digital Economy

Recent changes to the Global LEI System are clearing the path to global digitalization. Stephan Wolf, CEO, GLEIF, reviews key initiatives introduced and casts an eye forward to the future.

Author: Stephan Wolf

  • Date: 2021-06-18
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According to a recent global study from McKinsey & Company, Covid-19 has accelerated business’ digital initiatives by, on average, seven years.

In acknowledgement of this monumental leap forward, GLEIF has launched several strategic initiatives over the past year designed to broaden the value of the Legal Entity Identifier (LEI) in the fields of digital identity, digitized counterparty verification and their related use-cases.

As Germany celebrates Digital Day on June 18, GLEIF looks back at these milestones and considers what the future holds for the LEI and the global digital economy.

The Validation Agent: Opening the door to business ID services for legal entities

In September, GLEIF introduced a new role into the Global LEI System called the Validation Agent. The role is designed to help financial institutions and other supervised organizations make immediate gains in client lifecycle management and begin to develop innovative business identity services for their clients.

Validation Agents leverage their know-your-customer (KYC), anti-money laundering (AML) and other regulated ‘business-as-usual’ onboarding processes to obtain LEIs for their customers. By equipping their business client base with LEIs, Validation Agents can promote financial inclusion and create new value by pioneering revenue generating digital services in corporate identity management and cross-border supply chain relationships.

Validation Agents can also utilize the LEI to accelerate their internal digital transformation, in areas such as customer onboarding, payments and other transactions, and contract signing.

Since its launch at the end of 2020, the Validation Agent framework has gained significant traction around the world. Two significant institutions, J.P. Morgan and the China Financial Certification Authority (CFCA), have already completed the qualification process, with many more to follow.

The vLEI: Enabling instant, automated verification of business identity

Until now, the absence of an independent governance authority capable of establishing universal digitized trust between legal entities has presented an industry-wide barrier to innovation. To overcome this obstacle, GLEIF launched a cross-industry development program in 2020 to create a digitally verifiable LEI (vLEI). When complete, the vLEI will extend the Global LEI System to create a fully digitized LEI service that can enable instant and automated identity verification between counterparties operating across all industry sectors, globally.

With GLEIF acting as the ‘root of trust’, the vLEI service creates a cryptographically secure chain of trust that can replace the manual processes required to access and confirm an entity’s LEI data. This will give organizations worldwide the capacity to use their LEI’s non-repudiable identification data relating to their legal status, ownership structure and authorized representatives in a huge number of digital activities, many of them automated, enabling them to participate in the global digital economy for years to come.

As a result, the vLEI has the potential to become one of the most valuable digital credentials in the world; it will be the hallmark of authenticity for all legal entities everywhere.

In February 2021, GLEIF unveiled the official issuance and technical infrastructure models which will support the development of the vLEI and now invites software developers to engage with the program’s stakeholders to explore how the vLEI can be leveraged in future applications.

Digital Certificates: Embedding the LEI to uphold trust in the system

As legal entities’ use of digital certificates continues to grow in both number and use-case application, so too does the time and cost required to maintain them. The increasing complexity of this task is already undermining the trust system that digital certificates were designed to create.

To address this problem GLEIF has worked closely with the International Standards Organization (ISO) to standardize the process of embedding LEIs into digital certificates at the point of issuance, which will make certificates easier to manage, aggregate and maintain, as well as increasing transparency across the digital identity ecosystem. By becoming the common link between digital certificates, the LEI will provide certainty of identity in any online interaction, making it easier for everyone to participate with confidence in the global digital marketplace.

GLEIF is actively engaged with Certification Authorities (CAs) and Trust Service Providers (TSPs) to support and encourage LEI adoption in digital certificates as part of its new CA Stakeholder Group, announced in March 2021. This group aims to facilitate the transfer of mutually beneficial information between stakeholders in a joint effort to develop best practice guidelines and case studies for LEI integration. Following this, GLEIF welcomed the first commercial demonstration of an LEI embedded within a digital certificate with the launch of the China Financial Certification Authority’s (CFCA) TrustSign® software in March 2021.

LEI Search 2.0: Enriching and automating access to LEI data

GLEIF has also been hard at work to ensure the LEI’s own tools stay ahead of the digitalization curve.

In 2020, in line with its vision to enable broader, automated use of the LEI, GLEIF completed its migration to LEI Search 2.0, a new LEI search engine with rich data functionality, and published a companion API enabling third-parties to set up fast, customized and automated searches and retrieve open, higher quality LEI data from within their application environments.

By expanding the number of search parameters available, LEI Search 2.0 delivers a new level of transparency over how legal entities have evolved over time, enabling faster and more sophisticated counterparty due diligence, heightened granularity in regulatory oversight procedures and richer reporting potential for market data aggregators.

What’s next?

In the coming months GLEIF will continue working hard to advance these strategic initiatives.

The Validation Agent Framework is maturing and GLEIF’s focus is now on championing the roles benefits and encourage take-up from financial institutions and other supervised organizations around the world.

The vLEI continues to evolve at pace as stakeholders across healthcare, pharmaceutical, telecom, automotive and financial services begin to build out sector-specific applications.

In collaboration with members of the CA Stakeholder Group, GLEIF continues to combat complexity and advance trust and transparency across the digital certificate ecosystem around the world.

The LEI’s legacy is proudly rooted in financial services and regulation. Its future, however, undeniably points beyond to broader, digitized adoption and utilization across public and private sectors around the world. The Global LEI System is the only open, commercially neutral, and regulatory endorsed system capable of establishing digitized trust between all legal entities everywhere. It was established as a public good, and GLEIF remains committed to ensuring that every last drop of value is wrung from the system, and used to the benefit of all.

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About the author:

Stephan Wolf is the CEO of the Global Legal Entity Identifier Foundation (GLEIF). Between January 2017 and June 2020, Mr. Wolf was Co-convener of the International Organization for Standardization Technical Committee 68 FinTech Technical Advisory Group (ISO TC 68 FinTech TAG). In January 2017, Mr. Wolf was named one of the Top 100 Leaders in Identity by One World Identity. He has extensive experience in establishing data operations and global implementation strategy. He has led the advancement of key business and product development strategies throughout his career. Mr. Wolf co-founded IS Innovative Software GmbH in 1989 and served first as its managing director. He was later named spokesman of the executive board of its successor IS.Teledata AG. This company ultimately became part of Interactive Data Corporation where Mr. Wolf held the role of CTO. Mr. Wolf holds a university degree in business administration from J. W. Goethe University, Frankfurt am Main.

Tags for this article:
Digital Identity, LEI Search Tool, LEI Business Case, Verifiable LEI (vLEI), Digital Certificates, Validation Agents