OpenCorporates, a database of companies around the world, has launched a free identification system for businesses that aims to plug gaps in the legal entity identifier (LEI) programme.
The launch of the proto legal entity identifier (plei) was announced on February 10 by London-based OpenCorporates, which collates company data from corporate registries around the world.
It is compatible with the existing LEI programme, which allows companies anywhere in the world to obtain a unique string of alphanumeric characters that reflects their registered and trading names, ownership information and other details. This information can then be easily shared with banks and other participants involved in trade.
But unlike the LEI, the plei is available free of charge, which OpenCorporates said will encourage uptake among smaller businesses. It is initially being launched in the US but will expand globally this year, the organisation said.
The LEI was initially launched following the global financial crisis as a means of improving transparency in the derivatives market, but has since gained traction in trade finance, with the International Chamber of Commerce referring to it as a “digital trade enabler”.
However, despite the “urgent need” for digital transformation in international commerce, OpenCorporates said limited LEI coverage remains “a significant hurdle for global use cases, particularly in supply chains and trade finance”.
“Supply chain agility and transparency break down when businesses cannot be identified quickly and securely,” said Stephan Wolf, chair of Verifiable.Trade and former chief executive of the Global Legal Entity Identifier Foundation.
“The plei changes that on a global scale. By giving every company a standardised, free and open identifier, it unlocks automation, trust and inclusion for millions of SMEs, supports sustainability goals, and lays the foundation for verifiable, flexible and scalable supply chains and financial services.”
Speaking to GTR on the sidelines of this week’s GTR Mena event in Dubai, Wolf said international organisations, standards bodies and multilateral lenders “all love the idea”.
“Individuals and companies can go on the website and see their identifier for free, and that can be used then across the board,” he said. “This could be game changing.”
Wolf added that while larger corporates typically have an LEI already, signing up can be “a real burden for SMEs, especially in developing countries”, because of the fee and administrative process.
With LEI uptake remaining unspectacular, Wolf said the trade ecosystem needed “a big bang”.
“In order to have supply chain transparency and sustainability reporting, you need to understand who is acting along the supply chain,” he said.
“It does not replace the legal due diligence when you onboard a client or supplier, but it can help dramatically, because you have all the data, you have the links to the registries, you know where to look. Then when you have the supplier onboarded, data aggregation becomes a breeze.”
The plei is based on the same standards as the LEI, and holders can upgrade to a full LEI when required. Companies that already hold an LEI can continue to use it.
OpenCorporates founder Chris Taggart said the initiative provides “a bridge that makes the entire ecosystem more robust, more inclusive and significantly more affordable”.
Additional reporting by Maria Gonçalves.
