McKinsey report says LEIs could help combat trade-based financial crime

Adoption of Legal Entity Identifiers (LEIs) could play a significant role in banking operations concerned with trade-based financial crime according to new research undertaken by McKinsey & Company and the Global Legal Entity Identifier Foundation.

The research suggests the global adoption of LEIs could lead to significant savings of operational costs for onboarding clients and commercial dealings.

New use cases

The research identifies three new use cases for LEIs, two of which – commercial transactions and the extension of commercial credit – could help banks and parties to a trade in efforts to prevent and detect trade-based financial crime. The third new use case concerns capital markets.

In commercial transactions, LEIs would enable faster processing of trade instruments such as letters of credit and better identification of sellers on e-invoicing networks.

In the extension of commercial credit, LEIs would allow for more robust and efficient know-your-customer checks on borrowers, as well as better traceability of information on borrowers from multiple sources.

Overall benefits

The report suggests that operational efficiencies, cost savings, reduction of time to transact with clients and more reliable information can be gained by introducing the LEI into almost any process that requires identification and verification of a counterparty and that has a manual component.

This resulting easier counterparty identification will, according to the research, open the door to further automation and digitalisation of financial and commercial transactions across the globe.

Categories: Trade Based Financial crimes News

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