IGTA Journal - Winter 2020/2021

Delivered by Ingenta IP: 193.129.26.79 On: Tue, 28 Jan 2020 14:32:43 Copyright: Henry Stewart Publications Cleland and Hartsink - - - - - - - - Bank’s new RTGS service and mandating its use in payment messages’. 35 BARRIERS TO THE ADOPTION OF THE LEI IN PAYMENTS As outlined in the previous section, to enable LEIs to be included in a wider range of payments there needs to be wider LEI usage among global businesses. As the FSB concluded in its 2019 thematic review, despite progress to date, the LEI still has far to go to meet the G20’s objective. 36 The FSB summarised that to capture the posi tive externalities and maximise the network effects for the market, more efforts should be made at national and international level to promote LEI adoption and enhance the benef its to authorities and market partici pants from its use. There needs to be wider adoption of LEIs by SMEs (and their service providers) and other legal entities — as also acknowledged in the Wolfsberg Group Pay ment Transparency Standards. 37 GLEIF and industry experts estimate that for use of the LEI to achieve a critical mass, more than 40 million LEIs need to be issued 38 globally to cover all exporters and importers, a more than 20-fold increase on today’s uptake. There are a number of challenges to achieving this ambition: ● Awareness : There is a lack of awareness of the LEI and of the benefits that the LEI can bring throughout the business cycle and supply chain, particularly outside financial institutions. 39 This has to date limited the voluntary uptake of LEIs. In April 2018, the LEI ROC published a progress report with a comprehensive overview of use cases and stated that a few hundred million entities could be eligible for an LEI. 40 ● Accessibility : – Acquiring and maintaining an LEI entails both fees and an administrative burden. As of 2019, the flat portion of fees going to GLEIF is US$11 (reduced from US$17 as of 2018). Fees charged by LOUs for new LEI issuance range between US$55–US$220 and those for LEI renewals between US$35–125. 41 – Approaching LOUs for the issuance and renewal of LEIs is a separate process that entities need to remember to under take as it is not currently linked to other processes involving similar tasks, such as obtaining domestic identifiers. This may be a particular barrier for SMEs. ● Interoperability: – LEIs will be used alongside other iden tifiers and businesses need clear under standing of the mapping between these identifiers.This can help with KYC and AML processes. - - – The additional cost and time of migrating to a new identification system while maintaining existing identifica tion systems. ● Data : Where LEI reference data are not updated or expired by entities, the reliabil ity, usability and quality of LEI data will be compromised. 42 ● Infrastructure: So far only a limited number of domestic business registers have decided to become LOUs. If more domestic busi ness registers became LOUs then the LEI system infrastructure would benefit. ● Usage : – To date, LEIs are not well integrated into business processes and systems. Use cases have been identified but need to be worked through to address any potential barriers. – Governments are at the early stages of engaging on the LEI and on understand ing the benefits and operational efficien cies that widespread LEI adoption can offer.LEIs have the potential to align with national data strategy initiatives by facili tating cross-linking and consolidation of a diverse range of datasets, streamlining identification and data-quality checks and improving the end-user experience by alleviating administrative burden. Page 331 - - IGTA eJournal | Winter 2020/21 | 47