Thursday, December 1, 2011

Treasury Developing Global Tracking System for All Financial Transactions

Legal Entity Identification for Financial Contracts, a universal standard for identifying all parties to financial contracts is a new standard that is being developed by the U.S. Treasury - Office of Financial Research.

At a speech today at the “The Macroprudential Toolkit: Measurement and Analysis” Conference held in Washington D.C., and hosted by the OFR and the Financial Stability Oversight Council, Treasury Secretary Geithner hinted at the global reach LEI will have:
The OFR will collect and make available, to regulators and to the public, more and better financial data.

It will seek to better measure and analyze factors affecting financial stability.

It will report to Congress and to the public on its analyses of significant market developments, potential threats to financial stability, and appropriate policy responses.

And it will collaborate with regulators, industry, the academic community, and foreign policymakers and institutions to establish global standards for financial data. The Legal Entity Identifier project, which precisely identifies the parties to financial transactions, will help regulators, risk managers, and market participants all better understand risks and exposures across the financial system. We are pleased that U.S. leadership has helped give a strong start to the LEI project, whose framework was recently endorsed by the G-20.

Your goal today is to help set the agenda for the Office of Financial Research, help us to identify areas where better data and more research offers the best return.

As the architects of both the Council and the OFR have recognized: we need to rely extensively on collaboration—among regulators, between the public and private sectors, internationally, and otherwise.
.Although Geithner couched the LEI as collecting data that is necessary to track global financial stability, make no mistake, LEI is a monster global financial tracking system that has a mandate sufficiently broad in scope that it may result in the tracking of the mom and pop coffee shop, if some technocrat deems the mortgage on the coffee shop a trigger "financial contract" that requires an LEI. It, for sure, will cover gold dealers and perhaps any transactions with corporations and businesses. Down the road, it is not difficult to imagine the interpretation of the regulations will be stretched to include individuals, as "financial parties", when gold coins are purchased.

As stated in the development notice published in the Federal Register:
The scope of the reference data provided for each LEI issued should be sufficient to verify that users have correctly identified an entity and should include at a minimum the following information for each Identifier:

Electronic address
Legal status

in addition to the financial transactions conducted.

The first tracking of financial "contracts" will begin on July 15, 2012. It appears the initial LEIs will be required of those conducting transactions on financial exchanges. Over time, though, regulatory creep will result in more and more entities (and perhaps individuals) being caught in the web of those whose required to have LEIs and have their financial transactions tracked.


  1. OOH OOH - can I get the tracking number 666!!!???

    Got to make sure my wrist and forehead are clean ...

  2. i'm all for 'transparency' if this 'transparency' is applied to every politician, gov't, central bank, industrialists, etc. But the odds this will be for the benefit of the citizens are less likely than Gingrich being labelled as an ethical man.

    I have a sudden urge to read Orwell.

  3. It should be called the global market manipulation system. As for gold transactions being tracked that is already happening under the Anti-terrorism legislation. I have yet to find a reputable dealer that will not ask for your DL when you buy gold from them.

  4. I guess physical gold coins are our only hope for real property... and maybe bitcoin..

  5. My only friend is a goat, with 666 on his horns.

  6. all governments fuck off

  7. This is somewhat of a double-edged sword. While it is true that this will infringe upon the privacy of transactions, its goal (as with any governmental action) is to compile as much data as possible in order to "inform" the policy-makers on how better to inquire and/or control the economy proper. That's the bad part.

    The good part is that those who understand economics can use that data against them every time. In the age of split-second dissemination of information (past and present), that is absolutely priceless.

  8. What will be the broader impact of LEI on bitcoin exchanges? Currently, the two largest exchanges operate under the legal jurisdictions of Japan and US.