CounterpartyLink (CPL) is building out its Legal Entity Identifier (LEI) data on a daily basis and adding hierarchy data to the identifiers. The hierarchy data will help financial firms meet the requirements of the Regulatory Oversight Committee (ROC) of the LEI for hierarchical structures, and is already being used by firms seeking a clearer understanding of their counterparties and who controls and owns them.
In a progress note issued in January 2015, the ROC stated: “In light of the stage of development of the Global LEI System, the next pressing policy objective is the implementation of information on organisational relationship structures, particularly hierarchical structures. To this end, the ROC established in December 2014 a task force to develop a proposal for principles and standards for collecting in the Global LEI System information on the direct and ultimate parents of legal entities . . . Phased implementation of such information is expected to begin around the end of 2015.”
CPL, a provider of global legal entity and counterparty data, monitors newly issued LEIs, matches the identifiers to its database of over 360,000 legal entities and publishes up-to-date LEI data on a daily basis. It also builds LEI data hierarchies. The company’s recent projects include working with a tier one bank with 60,000 customers and counterparties on its database to validate the data and append LEIs to entities for which they have been issued. In future, CPL will add hierarchy data to the bank’s entity data.
James Redfern, managing director at CPL, says: “The LEI is a means to an end in terms of bringing companies together. The Holy Grail is hierarchy data, which is the hardest thing to gather and maintain.” While sourcing and validating data for an LEI data hierarchy which has a number of complex links can be difficult, more difficult is getting information from companies that are not compelled to file their details with an organisation such as Companies House in the UK.
Carl Needham, chief operating officer at CPL, explains: “We collect and validate data to show all the links in a hierarchy from the basic entity, to its parents and the ultimate beneficial owners of the top parent. We go to the most stringent level of 10% ownership when providing beneficial ownership information about an entity. But there can be gaps in the hierarchy if companies are based in countries where ownership does not have to be disclosed. Where this is the case, there may be need for legislation.” Bearing in mind these difficulties, CPL typically pulls together about 80% of required hierarchy data, and often 100%, with the rest being in jurisdictions where data is not disclosed.
As well as monitoring and matching LEIs on a daily basis, CPL maintains the data on a continuous basis, improving significantly on the rules of the Global LEI System that require LEI data to be updated annually. Redfern comments: “We add value here by notifying our customers of any changes to LEI data. This is important to understanding clients and counterparties, as well as to accurate regulatory reporting.”
He concludes: “Our purpose is to simplify and reduce our customers’ internal burden by providing accurate and auditable entity reference data that can be used for compliance with regulations such as Know Your Customer and Anti-Money Laundering, and for reporting under regulations including European Market Infrastructure Regulation and Dodd-Frank.”