Adoption of the legal entity identifier (LEI) has got off to a somewhat lethargic start. To date, around 2.35 million LEIs have been issued around the world, representing a fraction of the 320 million organisations that are currently eligible. GTR speaks to Simon Wood, chief executive at the world’s largest accredited issuer of LEIs, Ubisecure, about the progress made so far in the drive for widespread implementation and the project’s future prospects.


LEIs were created in the wake of the 2007/08 economic crisis to help improve financial stability worldwide and make sure counterparties to transactions could be readily revealed. Each string of 20 alphanumeric characters provides key information about businesses, funds and governmental organisations participating in financial transactions, including their name, when they were formed and, crucially, their ownership structure.

While the use of the LEI is a regulatory requirement for companies in certain jurisdictions, it is not yet mandatory across the board. Its proponents hope the innovation will increase access to trade finance, solve the problem of transparency and speed up digitalisation, but challenges such as cost and slow adoption persist.


GTR: What are the benefits of the LEI over other available forms of digital identification?

 Wood: The LEI is a highly assured, open access organisation identifier. It tells you who is who, so you understand the detail about the organisation, and it tells you who owns whom, so you know the consolidating ownership of that organisation as well. Probably the most important feature of the LEI is the high data quality. It’s important that the data can be relied on because this is being used to protect financial markets by design.

Today there are about 40 issuers of LEIs worldwide and, being globally recognised, the LEI applies to every region in the world. There are other identifiers, including the GS1 global location number, which identifies addresses and delivery locations. The information there is provided by the end entity and it’s not validated by anybody else, so you can’t rely on it as highly assured. The bank identifier code again is provided by the end entity, so that information is also not checked. The trader identification number is used by customs and is validated, but it’s not open access – you can only access it inside the customs regime within a particular country. But the LEI is global, all legal entities can have one, and there’s a fully defined governance framework around how to check it, issue it and so on.

Right now, there’s a big push towards making global supply chains more efficient.

Client and supplier onboarding costs today are high because most of the law still mandates that you have to use pieces of paper in global supply chains. According to a McKinsey study, there is a 5% to 10% reduction in the cost of client onboarding if the LEI is used to inform the process.

For example, once a bank has a client LEI, they can use it as a consistent reference identifier between all their departments to connect identity information and make sure they’re talking about the same entity across everything they do within the banking flow.

As the strength of identity assurance goes up, the more transactions we can carry out over the same channel, because we’ve lowered the risk. It also enables higher value transactions. Having transparency and trust in identity allows true automation in global trade at the organisation level, and that is one of the future benefits we will see from the LEI.


GTR: What is the current status of LEI adoption and who is driving it?

Wood: We’re still at a very early stage. Less than 1% of organisations have LEIs today. But that’s consistent with this being something new, and use cases will grow and grow over time. There is a huge opportunity to increase uptake.

But right now, it’s still early days for active use cases outside of regulation. In many cases, until you stumble across something that says, ‘please put your LEI number in here’, you may not even have heard of an LEI.

Banks can be validation agents. A validation agent is an entity that is already subject to legal controls over its understanding of an organisation – basically, know your customer. Banks are in a position to fast-track the issuance of an LEI because they’ve already got a governance framework around understanding their client. We have to look at a gap analysis, and the differences between what they do and what we need for the LEI ecosystem. But as long as there is a compatibility between their process and what we do to validate the entity behind the LEI, we can use fast-track issuance.

An SME is more likely to get the LEI through third parties that they work with. As we see global supply chains become more and more automated, a lot of that automation is being based around the LEI. Like broader B2B relationships, participants in a supply chain need to be identified and trusted.

We work with a number of large, top 10 banks as validation agents. We will see a move across the various tiers of the banking sector over the next couple of years. Organisations will find that they have an LEI because they’ve been issued one by a bank or one of the partners they work within their supply chain.


GTR: What is the status of the regulation needed to mandate the use of the LEI?

Wood: LEI adoption today has primarily been driven by regulation. ‘No LEI, no trade’ is often quoted in the regulatory world. A good example from a UK point of view is the Clearing House Automated Payment System (CHAPS). For CHAPS, if you’re a financial institution, the LEI is mandatory from November 2024. The Bank of England will broaden requirements for use of the LEI in CHAPS transactions across more and more business types over time.

You’ll find that just to participate in banking transfers, you’ll need an LEI as we go forward.


GTR: What barriers or challenges remain for LEI adoption? Is cost an issue?

Wood: The cost of an LEI is surprisingly low. I struggle to correlate a £70 annual fee with a cost objection for an enterprise, even for a 10-person SME or five-person micro-enterprise.

As we go forward and there are more and more obvious value points for the LEI, I think we’ll see an exponential rate of increase. More organisations will be issued with an LEI because someone else has provided it for them.

If there’s money to be made, hackers will try and subvert every system. Hackers are becoming more and more sophisticated, but the stronger digital identity we have, the harder it becomes for the hackers to be successful. The LEI is one piece of the jigsaw of being ultimately more protected against fraud.


GTR: How do you think the landscape of LEI adoption will change going forward?

Wood: Organisations need to become familiar with the LEI because it is going to become part of everyday life. It is being pushed by the World Trade Organization, the Financial Stability Board, the G20 and the International Chamber of Commerce.

We shouldn’t think about the LEI as being a one-time thing. It is your identity – it is describing your organisation to the world. Having it current, active and recently validated should be an important thing to you as an organisation.

Identifying participants can be costly and is often a slow, manual process conducted by expensive accounting staff. The LEI really streamlines this process, and in most cases, it will be a better investment to provide all partners with an LEI than continue to verify manually. In 24 or 36 months, I think we will see significantly higher adoption rates.

One area that is likely to drive a jump in uptake is the verifiable LEI (vLEI), which uses the verifiable credential, a digitally signed block of information about the data subject. Verifiable credentials have a built-in signing capability to say that they are valid and true. They allow the assertion of delegation chains and the digital proof of correctness of things like signatures and so on. The vLEI allows the LEI to participate in those verifiable credential ecosystems.

At the moment, we’re in discussions with a European regulator that needs to receive submission documents from organisations in order for them to be compliant. The big challenge they’ve got is working out that the person who submitted the document was entitled to do so. It’s quite a cost item for them.

With a vLEI, the organisation can sign the document directly or digitally delegate permission to a person within the organisation who can then submit the document. You can walk this chain of authority back to the organisation. Rather than having to look for letters of authority or written signature mandates, it now becomes a digital check.

It helps to generate that broadening pool of identity data that allows the delivery of digital identity use cases going forward. When you take a strongly authenticated individual and a highly assured organisation identity, that allows me to show who I am, who I represent and the rights that I have when I represent them. And that’s really where digital identity is going.

While the vLEI is just being launched, there are no statistics as yet. But we do have a parallel proof point for how organisation identity and electronic delegation can create efficiency and savings. Ubisecure previously deployed a representation solution to the Finnish government that digitised the organisation tax submission process and replaced face-to-face processing with automated digital workflows. This reduced costs by 99% and increased efficiency by orders of magnitude. However, being pre-LEI, the solution operated only within the confines of Finland. vLEI, being based on the global and standardised LEI, helps take that proposition global.