BIS, Gleif Team on LEIs in Cross-Border Open Finance Prototype

§ 01 Executive Snapshot

• What: GLEIF and BIS have developed a prototype to enhance cross-border open finance through the Legal Entity Identifier (LEI).
• Who: Global Legal Entity Identifier Foundation (GLEIF), Bank for International Settlements (BIS), and various central banks.
• Why it matters: The initiative aims to streamline KYC and AML processes for SMEs, making international banking more efficient and accessible.

§ 02 Key Developments

• Project Aperta has created a prototype for cross-border open finance that connects domestic networks in the UK, UAE, Brazil, Hong Kong, and India.
• The prototype demonstrates how the LEI can streamline KYC/B and AML checks, reducing compliance costs and onboarding times for businesses.
• Collaboration involved key stakeholders, including the Hong Kong Monetary Authority, Central Bank of Brazil, and Financial Conduct Authority of the UK.

§ 03 Strategic Context

• The project addresses the lack of interconnectivity in domestic open finance frameworks, which often adhere to different standards and formats.
• It aligns with the G20 Roadmap for Enhancing Cross-Border Payments by addressing inefficiencies in international financial services.

§ 04 Strategic Implications

• Immediate implications include enhanced access to overseas accounts and trade finance for SMEs, potentially boosting international trade.
• Long-term, it could facilitate the integration of LEIs into emerging digital asset ecosystems, enhancing transparency and regulatory oversight.

§ 05 Risks & Constraints

• Potential risks include the challenge of achieving consensus on technical standards and trust frameworks among different jurisdictions.
• Competition from existing domestic frameworks and reluctance to adopt a standardized identifier may hinder widespread adoption of the LEI.

§ 06 Watchlist / Forward Signals

• Future developments to watch include the adoption of LEIs in cross-border payment messages and feedback from pilot testing with commercial banks and fintechs.
• The success of Project Aperta may be indicated by increased participation from additional countries and financial institutions in adopting the LEI for cross-border transactions.