As a business owner, trading entity, or an investor, you already know how broken the system of financial transactions is! Due to the non-transparency in business, (for example, legal identities not disclosing their relationship with the other entities), you might have ended up being frustrated many times!
Well, GLEI system is what helps to solve such problems and regulate the transparency in the financial system.
GLEI or the Global Legal Entity Identifier System is a standardized approach to verification of the entities using the LEI. It supports the legal LEI for every business and makes the information public on the Global LEI Index.
In this blog, we’ll have a closer look at this broader topic and see how it adds credibility to the business. First, let’s throw some light on how the GLEI came into force-
A Brief History About The GLEI
The financial crisis in 2008 brought the world’s financial system down. In order to mitigate the effects and prevent such a disaster from occurring again, G20 was formed. As there was an urgency to have a global system to regulate the system of the financial market, the FSB (Financial Stability Board) came into existence in 2009.
It was in 2011 when the G20 called the FSB to provide recommendations for LEI and support the governance structure. As a result, the Global LEI System was formed to provides unique identification of legal entities participating in the money transactions around the globe.
Who Controls The LEI System?
In June 2014, the FSB established the GLEIF (Global LEI Foundation) supports the implementation and use of LEI codes worldwide. Headquartered in Basel, Switzerland, it is an international non-profit organization formed to maintain transparency in the global finance business.
What Are The Current Issues Making GLEI Vital?
Today, there is a lack of sufficient identification for the systems of a financial party. For example, suppose there are several variations for the single name of an entity. It would become challenging for an automated system to understand all these different names as the same entity. This, in turn, makes it tricky to aggregate and validate the data.
With a unique code for the individual legal entity participating in the financial market, tracking financials and business regulation become easier. This way, every entity would be issued with a separate code associated with a set of data for reference.
When this data is made available on a public LEI (legal entity identifier) database, it creates good transparency for both the users and the regulators.
How Does The GLEI System Operate?
The system operates in three tiers:
- LEI ROC (Regulatory Oversight Committee)
The ROC is a group of 71 authorities, 19 observers from different countries who oversee and coordinate the framework of the Global LEI System. It represents the public financial market authorities from around the world.
- GLEIF (The Global LEI Foundation)
GLEIF is the operational arm of the Global LEI System, which is overseen by the ROC. The first formal meeting of the board of directors of GLEIF was held in Jun 2014 at Zurich. It keeps an eye on the operational integrity of the GLEI system.
- LOUs (Local Operating Units)
LOUs are LEI issuing organizations. To make sure the GLEI system is at par with the user’s requirements has also established stakeholder groups. They facilitate the exchange of necessary information with the representatives of different marketing segments.
GLEI Paves The Way For Trusted Business Transactions!
Identification of a business isn’t something benefiting only the financial market or automation. It is also a way to solve the problems faced by customers while performing online transactions.
Perhaps, all of us have recognized how the problem of identities in financial transactions led to fraudulent cases. Also, we are aware GLEI can mitigate risk and increase transparency.
Still, the concept of LEIs isn’t present in the dictionary of many people. It is essential to spread more information about the benefits of having LEIs and how it optimizes reliability, quality of the business.
