Although standards for legal entity data are likely to evolve over time and become more rigorous, there does not exist today a standard directory of identifiers for legal entities across global jurisdictions, said James Redfern, head of sales and marketing at CounterpartyLink. But with an average of 27% of company records held at financial institutions deemed inaccurate, firms need to figure out how to fix these problems and then continue to maintain the database in the absence of any industry standard, particularly in current conditions, he suggested.
Redfern said, “The entity is the key element in the middle; it will become the centre of data operations.” Key to managing entity data is getting the linkages right, he said, referring to both the linking of entity data, which can quickly become complex, but also linking of disparate sources to gather that information, be that the registration authorities, regulators, exchanges, or other sources. Said Redfern, “But the linkages are rendered worthless if the data it is linked to is inaccurate or not fit for purpose.”
He promoted CounterpartyLink’s Client Data Audit Report as a useful independent auditing service that could be used within business cases for senior management. But the audit can also be very useful for helping to prioritise cleansing and maintenance work, for example prioritising the higher risk entities over those with lower risk or less exposure.
Through conducting such audits for clients, Redfern said that the most common areas for data impurities were: ownership (12%), company name (8%), registered address/headquarters (7%), regulator (6%), registration (5%), and identifiers (4%).
At least one senior member of the US Federal Reserve had highlighted entity data as a key ‘broken’ factor in risk assessment, perhaps indicating a likelihood of further examination of the issue and potential regulation down the line. But as Redfern pointed out, “It is beneficiary to have standards, but business will continue without them.”