On 9 July 2024, the Bank of England (BoE) published a speech by its executive director for payments, Victoria Cleland, on ‘A multi-tool for cross-border payments: the power of Legal Entity Identifiers’. In the speech, Ms Cleland discusses the potential benefits of Legal Entity Identifiers (LEIs) for payments, the role that they can play in enhancing cross-border payments, and steps that could be taken to drive their uptake and use.

Potential benefits of LEIs

Ms Cleland explains that the launch of LEIs in 2012, which was followed by the launch of the Global LEI Foundation (GLEIF) ten years ago, were important steps towards a more transparent, safer and efficient financial system. She notes that LEIs are now “firmly part of the financial system furniture”, enabling the clear identification of specific entities.

Beneficial use cases highlighted in the speech include:

  • Reconciliation processes could be enhanced by adoption of LEIs as an identifier in e-invoices passed between companies. This could be used to more quickly link an invoice with internal accounting system records on a trading partner, thereby reducing the need for manual processing and enabling consistent bookkeeping and financial statements.
  • If adopted in sanctions lists, LEIs could enable more automated compliance checking, reducing the need for bespoke technological solutions and reducing the occurrence of false positives.
  • If widely adopted, LEIs could enable faster and cheaper ‘know your customer’ processes by reducing frictions in verifying the identity of new customers, payers and payees.

Role in enhancing cross-border payments

Ms Cleland flags that greater use of LEIs is one of the FSB’s priority actions for enhancing cross-border payments and achieving Financial Stability Board (FSB) targets.

Steps to drive uptake and use of LEIs

The speech explains that international bodies are taking a number of steps intended to prompt greater use of LEIs, including:

  • The Financial Action Task Force’s public consultation on Recommendation 16 (the principal standard covering information required to be contained in cross-border payment messages for financial crime purposes) specifically references LEIs to be required as a mandatory element in cross-border payment messages.
  • The Committee on Payments and Market Infrastructures’ Joint Task Force requirements on harmonised ISO 20022 data requirements for enhancing cross-border payments highlight LEIs as a globally recognised and publicly available identifier to improve the speed, transparency and cost of cross-border payments.

The FSB is due to publish a follow up report on progress in promoting uptake of LEIs later in 2024. In the meantime, Ms Cleland calls for industry and regulators to do more to realise the benefits of LEIs for cross-border payments and more widely – including, for regulators, considering and advocating for opportunities to incorporate LEIs as a compulsory data element (which the BoE will be doing for payments settled in the UK high-value payment system (CHAPS) between financial institutions from 1 May 2025).