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Adoption of the legal entity identifier (LEI) in trade is gathering pace, with Toronto-headquartered tech firm Surecomp becoming the latest company to integrate it into its systems.

In a new partnership with the Global Legal Entity Identifier Foundation (GLEIF), the trade finance software and solutions provider will embed the global LEI index into all of its cloud-based solutions, giving Surecomp customers real-time access to the unique identification data of legal entities participating in their trade finance transactions.

Established in 2014 by the G20, the LEI is a unique, electronic, 20-digit standard identifier for parties in global financial transactions. Each LEI contains information about an entity’s ownership structure and thus answers the questions of ‘who is who’ and ‘who owns whom’.

A relatively simple solution, it tackles several compliance and risk issues. As trade becomes more globalised, it has become increasingly difficult for businesses to accurately identify information related to the parties they trade with, particularly when it comes to counterparties that have subsidiaries or that do business under various names. The process of acquiring this information is often a complex task, requiring a significant investment in terms of time, money and resources.

The LEI solves for this by enabling the identification of businesses with a unique code, which connects to annually verified business reference data and ownership structure information in a freely accessible online registry – the LEI Index, a central repository of historical and current LEI records.

Surecomp says the new partnership will help facilitate know your customer (KYC) compliance for its clients, by providing them with immediate certainty that the credentials of their trade counterparts are verified and trustworthy.

“The LEI is incredibly important for all trade participants, particularly since the pandemic which has seen fraudulent transactions become ever more prevalent,” says Enno-Burghard Weitzel, Surecomp’s senior vice-president of strategy and business development. “Offering our customers easier access to LEI data is increasing transparency, trust and efficiency in the entire trade finance process. Ultimately, it can also help to close the trade finance gap by making it easier for banks to verify SME customers.”

Support for the LEI has been growing in recent years. A 2019 study conducted by McKinsey found that its use could save the banking industry as much as US$4bn a year in client onboarding costs alone, while research carried out by the Asian Development Bank (ADB) in the same year concluded that the LEI was both affordable and easy to obtain by SMEs and large companies alike.Its usage could also contribute to closing the trade finance gap by making information about SMEs easier to come by, the ADB said.

In 2020, JP Morgan became the first validation agent in the LEI system, after the role was created by GLEIF to drive adoption. This enables JP Morgan to directly embed LEI issuance into its usual client onboarding processes, which it said at the time would increase the number of LEI registrations.

A year later, digital trade finance platform Contour added the LEI into its network, saying that it would cover the sign-up fees for those companies that wish to obtain the number, with the ultimate aim of driving greater usage.

This week, the International Chamber of Commerce (ICC) and the World Trade Organization (WTO) explicitly called out the LEI in a jointly released map of the digital trade standards, frameworks and initiatives they believe will equip participants in global supply chains with the tools they need to go digital.

So far, according to official GLEIF figures, the number of LEIs issued is just under 2.1 million, but as a growing number of organisations promote LEI adoption as a means of making trade better, cheaper and more efficient, this number is expected to rise rapidly.

“We are delighted that Surecomp is leveraging the Global LEI index to bring significant efficiencies and greater trust to its trade finance customers,” says Stephan Wolf, GLEIF chief executive. “The potential gain in terms of both cost and time savings are significant enough to promote further global trade growth.”