Seeking common legal entity standards to facilitate cross-border payments

Jochen Metzger and Tim Paulowitz

Journal of Payments Strategy & Systems, 2018, vol. 12, issue 4, 365-370

Abstract: Correspondent banking is vital to today’s globally networked world, yet in some locations there has been a significant decrease in the number of correspondent banking relationships. The Legal Entity Identifier (LEI) tackles the root causes of this development by helping with issues relating to due diligence and know your customer (KYC) obligations. Some actions to support the further use of the LEI are already in place, such as BIC- to-LEI mapping, the introduction of the LEI on an optional basis in SWIFT MT payment messages and the mandatory use of the LEI for reportable transactions within the European Union pursuant to the Markets in Financial Instruments Regulation and the European Market Infrastructure Regulation. Nevertheless, in terms of the global distribution and promotion of the LEI, there remains much to be done. This paper argues that banks, in particular, should seize this opportunity to embrace the LEI as they have so much to gain from it, most notably with regard to customer due diligence and facilitating their internal processes. The paper also discusses what the future may hold for correspondent banking and the LEI.

Keywords: Legal Entity Identifier (LEI); KYC; KYCC; AML/CFT; correspondent banking; due diligence (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:aza:jpss00:y:2018:v:12:i:4:p:365-370

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