CFIT plans digital ID for businesses to close loopholes, cut costs

A new plan to provide digital ID for businesses could save UK businesses billions in efficiency, lost revenue and fraud per year, according to the Centre for Finance, Innovation and Technology (CFIT).

CFIT says widespread adoption of Digital Company ID is the appropriate way to prevent economic crime. Based on an analysis of bank onboarding and KYB processes, CFIT estimates lower regulatory and administrative burdens for businesses, and £1.7 billion (approximately US$2.2 billion) less per year in compliance costs for financial institutions. The £6.8 billion ($8.8 billion) lost to fraud each year can also be reduced.

The “Fighting Economic Crime Through Digital Verification” report brings together insights from a coalition of 70 stakeholder CFIT describes as experts in financial crime. They represent financial services providers, pubic sector organizations and regulators, and technology providers including Daon, Yoti and OneID.

It recommends CFIT work with industry to develop, test and launch a prototype for Digital Company ID. The government should mandate data sharing on economic crime through Digital Company ID, appoint a body responsible for its implementation and governance and review the regulatory framework behind it to make sure it is fit for purpose. CFIT should work with industry to promote interoperability standards that will also support accountability and security, and a multi-stakeholder task force should be set up to identify high-value use cases for Company Digital ID in financial services. Finally, government departments should lead by example by adopting Digital Company ID for procurement, tax filings and confirmation statement submissions, CFIT says.

A proof of concept developed by CFIT indicates that around half of the cost associated with KYB compliance processes and verification can be saved with Digital Company ID, according to the report. Additionally, drop-offs can be reduced by 33 percent and onboarding made 60 percent faster.

The effort was foreshadowed in a white paper published by CFIT in December.

“The adoption of Digital Company ID has the potential to drive growth and foster greater economic prosperity,” says Sage CEO Steve Hare. “For UK SMEs, which make up 99 percent of the business landscape, this presents an opportunity to drive productivity while reducing compliance costs and cutting through admin. Overall, an important step towards a more digitised economy.”

The Digital Company ID data stack consists of bespoke databases, like Cifas for fraud risk data, optional datasets for SMEs like HMRC tax status and mandatory datasets for things like registration with Companies House.

The report details how the creation of a business digital ID would work, with the identity of directors, persons of significant control (PSCs) and ultimate beneficial owners (UBOs) verified through the use of a digital identity wallet or a standard identity verification process with a government-issued ID and a face biometrics check.

The report also includes sections on emerging design considerations, important enablers and next steps for the technology.

For its part, Companies House has established new identity verification requirements for directors and others with corporate control that UK businesses will have to comply with by the end of 2026. Companies House also launched an initiative with the Global Legal Entity Identifier Foundation (GLEIF) to make UK business easier to identify internationally.

GLEIF certifies first vLEI issuer in China, launches integration network

Similar work with some parallels is also ongoing at the international level.

China Financial Certification Authority (CFCA) is now qualified to issue verifiable Legal Entity Identifiers (vLEIs), the first body in China to receive the qualification, according to GLEIF.

As a Qualified vLEI Issuer (QVI), CFCA will use the vLEI to complement and interoperate with the identity verification tools used in China for enterprises and individuals, GLEIF says.

“As a Qualified vLEI Issuer, we will actively explore how this new form of digital identity can augment China’s existing tools to advance the transparency and verifiability of Chinese business and trade data,” says CFCA General Manager Gang Zhu. “There are a great many observable applications for the vLEI and the potential benefits, both domestically and on the global stage, are manifold.”

GLEIF and partner Open Ownership have also launched the Global Open Data Integration Network (GODIN) to strengthen the interoperability of open data and promote transparency.

The initiative embeds LEIs into open data sources for use across the public and private sectors.

GLEIF also contributed to the CFIT report.

Article Topics

Centre for Finance  |  Centre for Finance Innovation and Technology (CFIT)  |  digital company ID  |  digital ID  |  fraud prevention  |  GLEIF  |  KYB  |  Legal Entity Identifier (LEI)