In response to these challenges, the Global Legal Entity Identifier Foundation (GLEIF) has introduced the Policy Conformity Flag initiative, a tool designed to enhance transparency, accountability, and trust in financial markets.
Addressing the Need for Transparency
As financial markets grow increasingly interconnected, digital fraud poses a significant threat, eroding trust between parties involved in transactions. The Policy Conformity Flag offers a robust solution by helping legal entities provide open, standardized, and high-quality reference data. This ensures that financial institutions, businesses, and regulators can conduct transactions with confidence, particularly in cross-border scenarios.
What is the Policy Conformity Flag?
The Policy Conformity Flag is a straightforward indicator that shows whether a Legal Entity Identifier (LEI) record complies with policies set by the Regulatory Oversight Committee (ROC). The ROC oversees the Global LEI System, which ensures that all legal entities maintain updated and accurate records.
A “conforming” LEI indicates:
- Current LEI registration: The legal entity has renewed its LEI registration within the designated timeframe.
- Level 2 reporting: The entity has provided data about its direct and ultimate parents, or given a valid reason for not doing so.
These criteria help accelerate the identification of legal entities, streamline due diligence, and simplify cross-border financial activities.
Benefits of the Policy Conformity Flag
The Policy Conformity Flag not only promotes transparency but also delivers significant benefits across various areas of the financial ecosystem:
- Fighting Financial Crime: Accurate, up-to-date LEI data helps organizations detect suspicious activities more effectively. The Policy Conformity Flag aids in sharing and matching critical datasets, enhancing analytics used to combat financial crime.
- Monitoring Market Risk: By improving the ability to trace connections between entities, the Policy Conformity Flag supports market risk monitoring. It enables better tracking of risk factors and relationships between companies, making financial markets more stable.
- Enhancing Operational Processes: The transparency introduced by the Policy Conformity Flag reduces errors in transactions, lowers costs associated with data management, and cuts down on operational overheads like reconciliation and reporting.
A Tool for Global Compliance
For legal entities, ensuring conformity with ROC policies is crucial for regulatory compliance. Entities with a “conforming” LEI signal to market participants that they are reliable partners with transparent operational processes. This makes them easier to do business with, streamlining onboarding and counterparty verification processes.
How to Access the Policy Conformity Flag
Entities can view their LEI’s conformity status through the GLEIF interactive dashboard, which provides a global overview of compliance levels. This information is also available in GLEIF’s Golden Copy Files and the GLEIF API, enabling data users to verify the compliance status of LEIs.
Conclusion
The Policy Conformity Flag is a critical innovation in the LEI system, reinforcing transparency, trust, and reliability in global financial markets. By ensuring that LEI records are up-to-date and compliant, it fosters a safer, more stable financial ecosystem. For legal entities, adopting the Policy Conformity Flag is not just a step towards regulatory compliance, but a move towards a more transparent and trustworthy future in financial transactions.
For more information, visit the GLEIF website and explore the Policy Conformity Flag dashboard to check the compliance status of LEIs worldwide.
What to Do if Your LEI is in Non-Conforming Status
If your LEI is in non-conforming status, it's important to take prompt action to restore compliance. Start by renewing your LEI through NordLEI to maintain transparency and trust in your business dealings. If your LEI is still active, the issue may lie with incomplete Level 2 reporting. In this case, you can initiate a challenge to update the necessary data or contact our support team for personalized assistance and guidance.
