Standardizing Trust: Combating Financial Crime and Advancing Global Compliance with LEI and vLEI

By Clare Rowley, Head of Business Operations at GLEIF

Regulatory compliance remains one of the most prominent topics in the financial industry, yet its overall impact is not clear. In fact, according to the United Nations Office on Drugs and Crime (UNODC), between 2% and 5% of global GDP is laundered annually. At the same time, digitalization and emerging technologies - particularly artificial intelligence - are introducing new risks. This raises a critical question: how can regulatory frameworks and RegTech solutions evolve to ensure long-term trust and transparency?

International Challenges Require Global Solutions

Established in the wake of the 2008 financial crisis, the Global Legal Entity Identifier (LEI) System was designed to address the inability to consistently identify counterparties across markets. Today, the LEI is embedded in more than 200 regulations worldwide, reflecting strong regulatory endorsement.

In recent years, adoption has accelerated, particularly within anti-money laundering and counter-terrorist financing (AML/CTF) frameworks. The European Union has taken a leading role, publishing a new AML package in 2024, with implementation scheduled for July 2027. Under this framework, entities are required to disclose an LEI in customer due diligence processes where available, reinforcing its importance in Know Your Customer (KYC) practices. Similarly, the Australian Transaction Reports and Analysis Centre (AUSTRAC) has recently introduced the LEI under its AML/CTF Amendment Rules 2026.

As a globally recognized standard, the LEI reduces ambiguity in legal entity identification and enables regulators to operate within a common, interoperable framework. This shared foundation is essential for fostering cross-border collaboration and strengthening efforts to combat illicit financial activity.

Enhancing Transparency in Cross-Border Payments

One area where these challenges are particularly evident is cross-border payments. Driven by globalization in trade, capital flows, and migration, volumes have grown significantly, with the European Central Bank (ECB) projecting that cross-border payments will reach €268 trillion by 2030. As volumes rise, so does regulatory scrutiny - particularly around AML and sanctions compliance - making precise and standardized entity identification increasingly critical.

The Financial Stability Board (FSB) encourages the adoption of the LEI in cross-border payments, highlighting benefits such as improved data standardization, enhanced straight-through processing (STP), and more efficient KYC and sanctions screening. Other international bodies, including the Financial Action Task Force (FATF) and the Bank for International Settlements (BIS), have similarly emphasized these advantages. Together, they underscore how the LEI can improve the identification of originators and beneficiaries in payment flows between legal entities while strengthening the detection of illicit financial activity.

From Compliance Requirement to Strategic Asset

As regulatory momentum builds, the Global Legal Entity Identifier Foundation (GLEIF) continues to support LEI adoption across the private sector. Through their Partners Program, organizations such as Eastnets, LSEG, Montran, Moody’s, Notabene, Nth Exception, and Saphyre are integrating the LEI and its digitally trustworthy counterpart, the verifiable Legal Entity Identifier (vLEI), into their solutions, systems, and workflows.

For example, Montran’s transactional solutions for market infrastructures and commercial banks use the LEI to verify an entity’s identity throughout the entire transaction lifecycle. This persistence is key for internal checks, such as sanctions screening and AML, as well as for external clearing systems. Similarly, Saphyre is embedding the LEI as the universal digital identity across its pre- and post-trade ecosystem, delivering the foundation for true interoperability, automation, and transparency in global finance.

These examples illustrate that the LEI is increasingly seen not only as a compliance requirement but also as a strategic asset that enhances operational efficiency, reduces friction, and strengthens resilience across financial markets.

The vLEI: Enabling the Next Phase of Compliance

As threats such as deepfakes and identity fraud become more prevalent, compliance is evolving from a reactive process into a proactive, technology-driven function. The vLEI supports this shift by enabling counterparties to verify business identities and authorized representatives of the business in real time. This capability enhances transparency and trust in digital transactions, particularly in increasingly complex and decentralized environments.

An emerging application of this innovation is Chainlink’s Automated Compliance Engine (ACE), which was recognized at the Swift Hackathon 2025 in Frankfurt. The solution leverages the vLEI to support cross-chain and cross-border trading of regulated digital assets. By integrating the vLEI, ACE enhances interoperability, ensures compliance with regulatory requirements, and protects data integrity.

The Path Towards a More Transparent Financial System

As regulatory frameworks continue to evolve and converge around standardized, high-quality data, financial institutions are increasingly turning to automation to manage growing complexity. In this environment, the importance of globally consistent and verifiable entity identification will only continue to grow. Together, the LEI and vLEI provide a foundation for the next generation of regulatory technology - enabling more effective, seamless, and globally integrated compliance while supporting a more transparent and resilient financial system.