Streamline Payee Verification Processes with the Legal Entity Identifier

As adoption of real-time and other payment types increases across the globe, fraud detection strategies must also evolve. In parallel, the regulatory bodies overseeing payments are adapting their requirements.

For example, FATF’s recently consulted Recommendation 16 suggests beneficiary financial institutions should ensure that information in the payment message match beneficiary account details. However, matching names and addresses in cross-border payments is a challenging task due to diGerences in translation, transliteration, etc. As identified in the European Union’s instant payments regulation, there is a solution - a single, globally consistent identifier for payees across borders, legal jurisdictions, and payments schemes - the LEI.

Key Benefits when using the LEI for payee verification:

Precise payee identification:

The LEI is a structured and unique identifier, meaning originating and beneficiary entities can be identified with LEIs in the payment messages in an unambiguous manner. If the beneficiary LEI is included in the payment message, the receiving bank can confirm as an exact match the beneficiary entity associated with the account, thereby adding an additional layer of trust for customers.

Enable eCicient machine-to-machine communication:

By integrating LEI in the verification of payee service, each payment carries not just an account number, but a unique identifier that unequivocally confirms the identity of the payee. This speeds up the payment process, resulting in faster settlements and improved customer experiences.

Cost reduction and improved user experience:

Failed payments (Repair payments) which require manual intervention are costly, time-consuming and have the potential to cause wider reputational damage if deadlines are missed. Furthermore failed payments frustrate payors and payees who need to guess the discrepancies in names.

Reducing the risk of fraud:

Detect potential risks or irregularities earlier in the payment process by informing the originator of important fraud flags like frequent name and address changes as well as important details like the legal form of the entity or the parent information.

Key future-looking digital identity solution:

The verifiable LEI (vLEI) is based on verifiable credentials and it enables secure authentication of individuals’ role in relation with a legal entity. Such solutions can facilitate secure authentication, digital signing and permissioning. PSPs can more easily prepare for the digital transformation of payments and oGer additional fraud prevention services leveraging the vLEI.

For more information, you can refer to this video.