In the course of the digitalization of the world, identity processes must now also be digitalized so that legal entities can establish trust without human intervention. This cannot happen soon enough: Trust in digital authenticity is a scarce commodity. Cybersecurity Ventures estimates that global damage caused by cybercrime could reach $10.5 trillion by 2025, and cyberattacks are just one of many potential threats. At the heart of the challenge is that it can be difficult to tell if something is truly authentic when it appears online. As global supply chains become more prevalent and complex, the need for digitally verifiable, trust-building mechanisms is growing by the day. Global, standardized and secure digital identities for businesses, such as the Legal Entity Identifier (LEI), play a crucial role in this.
As the world’s economies recover from the pandemic, their GDPs will also rise, supported by the accelerated development and adoption of digital technologies and processes. According to the London-based Centre for Economics and Business Research, the global economy will reach $100 trillion in 2022 instead of 2024. But the road to prosperity is long and winding. Businesses around the world face a host of other challenges, including higher inflation risk, the global energy crisis and the unmet need for a universally recognized and standardized secure digital identity.
In recognition of this, and the fact that the benefits to the business community are growing as LEIs become more widely adopted, GLEIF has evolved and taken a new strategic direction: to drive the adoption of LEIs by legal entities everywhere, and to encourage wider, voluntary use of LEIs beyond the use cases required by law. And to do so in a way that enables global identity, protects trust and promotes transparency in the rapidly digitizing global economy.
While GLEIF’s vision remains constant (“one global identity behind every business”), the organization is undergoing a transformation in response to this new direction. It is broadening its horizons beyond regulated LEI use and deepening its commitment to helping organizations understand how LEI can bring greater trust, efficiency and transparency to any identity management system in any sector – offline or online.
To tell the story of how technology is changing the way people, businesses and governments decide who to interact with and trust, GLEIF has undergone its own transformation. To reflect this, the Foundation has modernized the way it presents itself to the world. As the official custodian of records and the underlying network that facilitates responsible interactions between legal entities worldwide, GLEIF needed a fresh, clear brand identity, including a new logo and tagline, to reflect the organization’s diversity and universal applicability in both the offline and digital worlds. While the external features of the GLEIF identity have changed, the central purpose and heart of the mission remain the same: to create lasting and verifiable trust between legal entities everywhere.
Like many origin stories, the GLEIF story was born out of necessity. After the 2008 financial crisis, the world’s regulators agreed that financial markets needed to become far more transparent if they were to prevent a repeat. The lack of transparency had become painfully apparent, particularly in relation to legal entities operating in the capital markets, making it almost impossible to assess, let alone manage, economic risk on a global scale. In the years that followed, the Financial Stability Board (FSB) worked closely with the finance ministers and central bank governors of the Group of 20 (G20) to develop a universal means of identifying legal entities involved in financial transactions. This collaboration resulted in the creation of GLEIF, a supranational, not-for-profit organization tasked with regulating and supporting the adoption and use of LEIs. A truly universal corporate identity system supported and overseen by the G20, the FSB and the Regulatory Oversight Committee (ROC), a group of global authorities.
From the outset, the initiators of the LEI initiative have emphasized the need to make LEIs a “broad public good”. So far, this “good” has been most evident in the global financial markets, where the use of the LEI has been widely mandated and has successfully created much-needed transparency. In the fight against money laundering, terrorist financing and other forms of financial crime, more than 200 financial regulators worldwide have now mandated the LEI for legal entities operating in the capital markets. Today, more than two million legal entities around the world identify themselves internationally with an LEI.
Driving voluntary adoption across sectors
To encourage the voluntary adoption of LEIs, GLEIF simultaneously makes it easier and more valuable for organizations to obtain an LEI, while creating a business justification for organizations that require validated and verified identity practices to incorporate the LEI into their own onboarding processes. This is done in collaboration with identity industry stakeholders and the network of LEI-issuing organizations by further developing and expanding the existing ecosystem to remove economic and operational barriers to LEI use.
Moreover, as the world’s only open, standardized legal entity identification system recognized by regulators, the LEI has the potential to be a “broad public good” beyond capital markets and regulatory requirements. This potential lies in its ability to enable market participants to benefit from the wealth of information available in the Global LEI Index, the database of unique LEI records that GLEIF makes available to everyone free of charge. This means that any third party – from curious consumers to regulators – anywhere in the world can match an organization’s identity against a legitimate and verified data source.
The use cases are numerous and varied. Among them, the utility of LEI to promote global trade stands out. Building cross-border supply chain partnerships quickly becomes a tedious and lengthy process due to the logistical and linguistic complexities associated with conducting due diligence on foreign partners. By providing a globally standardized and numerical method of identifying legal entities, LEI alleviates this complexity, streamlining the process so that contracts can be signed quickly, orders placed and fulfilled, and cross-border trade flourishes.
Enabling digital identity
Another way GLEIF is building on and expanding the value of the LEI as an organizational identity management tool for all businesses everywhere is by extending its unique applicability in the digital world. To equip and empower the global economy in this regard, GLEIF leverages existing technologies such as digital certificates and a new model of decentralized corporate identity to enable companies everywhere to use the global LEI system to self-identify and verify the authenticity of counterpart organizations without the need for human intervention. In both cases, ISO standards have been established to enable uniform implementation worldwide, industry-specific proofs of concept are rapidly maturing, and the network of GLEIF partners known as LEI-issuing organizations is expanding and diversifying in anticipation of future demand.