A new package of EC legislative proposals harnesses the LEI as a transparency tool to help protect EU citizens from the consequences of illegal money flow and the financing of terrorism

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The European Commission (EC) has moved a step closer to clamping down illicit money flows in July 2021. Four legislative proposals were published with the intent to strengthen the EU’s anti-money laundering and counter financing terrorism rules. 

Within the proposals the EC has officially recognised the value of the LEI as being a unique mechanism that is capable of supporting transparency within any ecosystem, they have formalised the LEI as an important component of future AML/CFT efforts. Included in the four EC proposals, two of them call for the LEI to be used in certain customer identification and verification scenarios where it is available. 

  • New Regulation on AML/CFT: Proposal for a Regulation of the European Parliament and of the Council on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.
  • Revision of the 2015 Regulation on Transfer of Funds: Proposal for a Regulation of the European Parliament and of the Council on information accompanying transfers of funds and certain crypto-assets (recast).

There has been a huge leap forward in EU-wide proposals for future-proofing AML/CFT regulatory frameworks, in terms of realising a key component of the G20 and financial stability board’s vision by creating the LEI as a public good. It is a huge benefit to society in protecting EU citizens from the impact of terrorism and organised crime. 

The EC is championing the LEI within the AML/CFT context and highlights that there are many benefits. Using LEIs consistently for entity identification can diminish the margins of error related to language ambiguity, human interpretation, and manual intervention. 

Whilst this is the first time the LEI has been officially endorsed by the EC in its AML/CFT framework, the LEI has a long track record of being a powerful tool in assisting the efforts of financial institutions conducting fully automated, straight through processing by replacing the need for outdated manual checks. The LEI has increased the speed and effectiveness of client onboarding and ongoing compliance checks.

The EC has recently recommended that the LEI be used wherever available for customer identification and verification in AML/CTF legislative reforms; it has the potential to drastically increase the transparency of legal entities participating in financial transactions. The LEI is a global standard for unique entity identification preventing financial criminals that once operated via networks across borders now unable to conceal their transactions. 

By including the LEI in its AML/CFT legislative package, the EC has strengthened its efforts across Europe by using global standards in the promotion of transparency and financial stability. 


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