The importance of entity identification

1.72 fulltime employees.

That's how many extra members of staff the Banking Compliance Index predicted would be needed per financial institution in the second quarter of 2015 to cope with the ever rising demands of OFAC and other bodies with international reach.

And, as an average, this caters for hundreds of tiny financial institutions – your organisation may well have stumped up much more than its share of this global job creation scheme, contributing to a regulation bill estimated by the BCI to be close to a quarter of a billion dollars.

But imagine how many new hires would be needed without the right tools to pin down the companies – or entities – you do business with.

Entity identification is a perennial challenge for our many clients working in KYC and onboarding functions in this sector. Increasingly, though, it's becoming just the first step in addressing the vexing phenomenon of companies being "sanctioned by extension".

Put simply, this is the knock-on effect of unlisted entities higher up the corporate group being sanctioned and owning more than 50% of the company in question, which is itself therefore sanctioned, even if it doesn’t explicitly appear on any sanctions lists.

We'll touch on these corporate ownership structures but the first step is no less important, given the huge variety of identifiers.

Where do you start? LEIs? GIINs? ISINs? VAT numbers? And these are just the common ones. The simple fact is that you could find yourself relying on any of them.

With a mission to make our clients' lives easier, we task our information providers around the world with gathering as much of this information as they can, which we peg to the 200 million private companies on our databases.

Structured for optimum searchability and matched by our algorithms, these identifiers can number well into double figures for some companies. Barclays Bank, for example, has 13 unique identification numbers on our record for it, ranging from LEI to SWIFT code.

Once you have your identifier, you have your entity, and you can investigate the other interlinked facets – corporate ownership structures, beneficial ownership, directorships, adverse media, and PEPs and Sanctions information, not to mention standardised financials and credit metrics – all of which we've stitched together from a huge pool of resources.

Against this backdrop, increasing average headcounts by 1.72 seems quite modest. Throughout 2016, we'll keep doing our bit to make sure the number stays so.

This piece first appeared as the foreword to the second edition of the Entity Data Management Handbook, published by Data Management Review.

Download your copy of the 2016 handbook to learn about:

• The Legal Entity Identifier
• Regulation requiring entity data
• Sourcing entity and hierarchy data
• Approaches to entity data management
• Emerging entity data quality technologies
• Critical entity data for client onboarding
• Benefits and business opportunities