A unique, international business entity identifier (IBEI). What’s so hard about that? We send shuttles into space, perform heart transplants and generate nuclear power. Why do we have such a hard time agreeing on the identity of a mining company in Johannesburg, a drug company headquartered in Basel or a hedge fund in the Cayman Islands?
There are two key reasons. First, there has been a lack of support from the business. Most financial institutions operate perfectly well on the surface of it so why spend time and money trying to fix a problem that does not appear to exist? Sure, STP rates could be improved, system implementation time could be drastically reduced, fewer execs would worry about going to jail and capital would be more efficiently deployed. The good news on this front is that while these sometimes hard to quantify benefits are often shunned, our friends the regulators are slowly forcing firms to adopt at least consistent firm-wide business identification.
Second, even if the funding were secured, no pragmatic, cost effective and widely accepted solution has been available for universal business entity identification.
International data vendors would argue that they offer business entity data and identifiers. One problem with this model is that it is almost impossible for a data vendor to keep this information up to date and synchronized with all its clients. Another issue is the restrictions vendors place on the use and distribution of the data. A chief data officer from a global investment bank informed us recently that his firm purchased business entity data about a single company from a major data vendor 92 times in one day!
Regional data vendors are also packaging their business entity data with identifiers with a view to helping their clients address the universal identification challenges. Of course you run into the exact same timing and licensing issues highlighted above and, in addition, there is no integration between the regional vendors.
So are the proponents of universal business entity identification within financial institutions wasting their time trying to coax budget out of those who control the purse strings? And if they succeed in securing budget, how should it be spent?
In our experience, financial institutions are uncomfortable with completely relinquishing control of their internal business entity identification processes to a third party. It’s currently just too risky for them to completely give up control of management of their customer and counterparty information. What these firms have shown a willingness to do is to have a third party assist with data quality improvement and linking internal to external identification standards.
Avox validates, enriches, remediates and cross-references business entity content for a number of global financial institutions. Each entity record is allocated an Avox identifier (AVID), which is itself linked to each customer’s internal identifier as well as to its required external identifiers. The AVID is made available to Avox clients free of charge. No restrictions are placed on its distribution or on distribution of the core business entity data scrubbed by Avox for its clients. Conversely, there is no requirement for Avox clients to use the AVID as their internal identifiers are linked and maintained by Avox.
It is our strong view at Avox that a truly universal IBEI must be free and that no restrictions can be placed on its usage. There is a cost associated with mapping and maintaining a firm’s business entities to external data but this is true of any cross-referencing effort. Avox is completely agnostic with respect to what identification standard the market chooses to adopt, as long as the issuer of the standard does not restrict the usage of the identifier and associated core data in a manner that precludes free sharing of that information.
If data vendors would discontinue associating intellectual property value to their identification schemes and make them freely available and restriction free it would be infinitely easier to maintain cross-references among them. Universal business entity identification can be achieved, and indeed is being achieved, without this dynamic. It will simply take longer and cost the industry more money without increased data vendor and financial institution collaboration.
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