By Stephan Wolf, CEO of the Global LEI Foundation.
Businesses today face significant pressure to go digital. Government and private sector organisations around the world are racing to digitise processes, products, and services – even national currencies – to remove friction, save money, streamline operations, and improve user experiences.
Despite the tremendous benefits it delivers, digital transformation is not a panacea for all that ails the business world. If, for example, a service operates within the boundaries of a fragmented ecosystem, the digitisation process alone won’t make it transversal. And as the digital divide widens, barriers to accessing products and services are becoming more pronounced. And then, there is the issue of authenticity. As more partnerships are established across legal jurisdictions, and more transactions between these partners move online, the crucial job of counterparty identity verification is getting more complex, time-consuming, and operationally onerous. Put simply, in today’s global digital marketplace, it is harder than ever for businesses to establish and maintain trust.
Successful digital transformation will only follow thoughtful, strategic real-world changes to policies, procedures, and infrastructure. Most leaders know that organisational change is hard, though, and research suggests that digital transformation may be even harder: McKinsey & Company found that fewer than 30% of digital initiatives succeed and that transformation success is still very much the exception, not the rule.
A recent blog by the International Monetary Fund (IMF) illustrates this reality well. According to the IMF, the success of African countries implementing central bank digital currency pilot programmes will be determined by the extent to which the countries are willing to invest in developing ‘the expertise and technical capacity to manage the risks to data privacy, including from potential cyber-attacks, and to financial integrity, which will require countries to strengthen their national identification systems, so know-your-customer requirements are more easily enforced’. These countries must make foundational changes before they can undergo digitisation.
Global problems need global solutions. And it is in this tension between accelerating digital transformation and improving fundamental business processes that the Global Legal Entity Identifier Foundation (GLEIF) is bringing unique value.
Born out of the financial crisis of 2008 and officially established by the Financial Stability Board (FSB) in June 2014, GLEIF is a supra-national, not-for-profit organisation that regulates and supports the implementation and use of the LEI. Its mission is to increase transparency by regulating a genuinely universal identification standard – a unique 20-character code created for a legal entity. This single code represents a single organisation so that anyone, anywhere in the world, can trust that an organisation is who it claims to be. Today, over two million legal entities around the world identify themselves internationally using an LEI.
From the beginning, the LEI initiative has served as a ‘broad public good’, evident mostly in global financial markets where its use has been widely mandated, creating much-needed transparency and promoting financial inclusion. In the fight against money laundering, terrorism financing, and other forms of financial crime, more than 200 financial regulators worldwide mandate the LEI for use by entities engaging in capital markets.
It is fair to say that the LEI has transformed due diligence, KYC, and anti-money laundering processes for financial institutions, regulators, and entities around the world. And it will continue to do so by simultaneously making it easier and more valuable for organisations to obtain an LEI, while creating business justification for organisations with the need for validated and verified identity practices to build the LEI into their own onboarding processes. It is doing this, in collaboration with identity industry stakeholders and its network of LEI issuing organisations, by evolving and expanding its existing ecosystem to remove economic and operational barriers to LEI use.
At the same time, the organisation is undergoing a transformation of its own – a transformation that will enable GLEIF to expand its horizons beyond regulated LEI use and help organisations see how the LEI can bring greater trust, efficiencies, and transparency to any identity management system in any sector. This new strategic direction rests on the understanding that the benefits to the wider business communities grow in line with increasing LEI adoption, so GLEIF will seek to drive LEI adoption by legal entities everywhere, and to encourage broader, voluntary utilisation of LEIs beyond use cases mandated by regulation.
In parallel, GLEIF recognises that enabling digital identity is critical. GLEIF will continue to build on and amplify the value offered by the LEI as an organisational identity management tool by expanding its unique applicability in the digital world. As the world’s organisations rush to digitise their processes and transactions, confidence in digital authenticity remains in short supply. To equip and enable the global economy in this respect, GLEIF is leveraging existing technologies such as digital certificates and a new model of decentralised business identity to enable businesses everywhere to use the Global LEI System to identify themselves and verify the authenticity of counterparty organisations without the need for human intervention. In both instances, ISO standards have been established to enable uniform implementation globally, industry-specific proofs-of-concept are rapidly maturing, and GLEIF’s network of partners, known as LEI issuing organisations, is expanding, and diversifying in anticipation of future demand.
While GLEIF’s vision remains constant, GLEIF has modernised the way it presents itself to the world in acknowledgment of its transformation. A fresh, clean brand identity has been created, including a new logo, strapline, and trust marks. The intention of this outward transformation is to reflect the ongoing evolution of the LEI’s universal applicability and broadening relevance in both the offline and digital worlds, and to help the GLEIF ecosystem better convey the LEI’s central purpose: to create lasting and verifiable trust between legal entities everywhere, whether offline or online.
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