DTCC Connection

Jun 16, 2016 • DTCC Connection

Harnessing the Public-Private Partnership Model to Solve Global Identity Crisis

By Joseph King

Bill Hodash, DTCC Managing Director of Enterprise Data Management, discusses the private-public partnership model at the ID2020 Summit.
Bill Hodash, DTCC Managing Director of Enterprise Data Management, discusses the private-public partnership model at the ID2020 Summit.

On January 1, 2016, the 17 Sustainable Development Goals (SDGs) of the 2030 Agenda for Sustainable Development — adopted by world leaders in September 2015 at a UN Summit officially came into force. Over the next 15 years, with these new Goals that universally apply to all, countries will mobilize efforts to end all forms of poverty, fight inequalities and tackle climate change, while ensuring that no one is left behind.

SDG 16.9 aims to “provide legal identity to all, including birth registration, by 2030” - a hugely important imperative that affects an estimated 1.8 billion people without a legal identity. These vulnerable populations suffer legal, political, social and economic exclusion. Once a person has an identity, government and non-government organizations can help them become safe, part of society, financially included and economically active.

To jumpstart this initiative and meet the goals of SDG 16.9, a global public-private partnership named ID2020 has been launched. The core ID2020 team comprises industry leaders and identity experts, which is gradually expanding to include government and non-governmental partners, and industry organizations working in collaboration.

ID2020 held a Summit to launch the initiative on May 20 at the UN Headquarters in New York with more than 65 speakers from the public and private sectors including three Ambassadors. The ID2020 Annual Summit is designed to foster a global conversation and build a working coalition to identify and build the enabling conditions for the creation of a legal digital identity for all individuals at risk.

Public-Private Partnership

One of the key panels of the event “Getting Started? A Public Private Partnership Approach,” included Bill Hodash, Managing Director of Enterprise Data Management at The Depository Trust & Clearing Corporation (DTCC). During the panel, Hodash presented DTCC’s perspective based on its experience in launching a private-public partnership model that brought together more than 70 public authorities from more than 40 countries to coordinate and oversee a worldwide framework of the Legal Entity Identifiers (LEI) to mitigate financial risk.

Offering a look back on how public-private partnerships have worked in the financial services industry, Hodash also offered a checklist of questions to push the possibility forward that a similar approach could work for individual people.

Lawrence Wintermeyer, CEO, Innovate Finance, served as moderator for the panel. which also included John Farmer, Director of Technology & Civic Innovation, Microsoft; Jessica Shannon, Partner, Global Governance & Anti-Corruption, PwC; Ray Kimble, GSMA Advisor; Peter Graham, Managing Partner, PSG Solutions, LLC; and James Bryce Clark, General Counsel, OASIS: Advancing open standards for the information society.

Bill Hodash, DTCC Managing Director of Enterprise Data Management
Bill Hodash, DTCC Managing Director of Enterprise Data Management.

During his presentation, Hodash explained that DTCC was formed as a result of a private-public partnership to solve what was known as the “paperwork crisis.” In the late 1960s and early 1970s, trading volume surged in equities, which forced the New York Stock Exchange to close one day a week. The Depository Trust Company, a DTCC subsidiary, was created to centralize clearing and what had been up to that point a firm-to-firm, manual process.

Fast forward to the 2008 financial crisis. After the crisis, DTCC was at the forefront of another public-private partnership – one that created LEIs to uniquely and persistently identify counterparties on financial transactions, a tool that which helps firms improve their counterparty risk management and helps regulators and other agencies analyze systemic risk.

To address the issue, the Global Legal Entity Identifier System has been established by over 70 regulators and over 30 private sector organizations that operate local operating units. The largest of these units is The Global Markets Entity Identifier (GMEI) utility, DTCC's LEI solution which was created in collaboration with SWIFT. The GLEIS creates and applies a single, universal standard identifier to each organization or firm involved in a financial transaction. Each LEI is unique to an organization and recognized by every country that participates in financial markets.

“The LEI is a reality because the private sector securities industry and public sector governments and regulators saw the problem at the same time, considered it a critical priority for themselves and recognized that for the problem to be solved, a partnership was necessary,” Hodash said. “Once that happened, the solution was actually the easy part.”

Factors for Success

Hodash said a series of questions must be answered in order to determine if a public-private partnership has potential to be successful.

  • Is the problem a critical or compelling one:
    • To the public sector?
    • To the private sector?
  • Have they identified the problem on their own such that is important to them even if not for the other sector?
  • Can either sector successfully implement it on its own?
  • If not, do the two sectors understand that?
  • If so, do the two sectors need the problem solved in order to achieve their broader objectives?

"If you actually get to the last question and the answer is yes, you have the foundation for the public-private partnership necessary to forge a solution that both sectors can agree on, push forward and encourage, incent, or even mandate their constituencies to follow,” he said.

Often there is a single, galvanizing event that creates the need for the partnership, he added. For the creation of the LEI Hodash explained, that event was the financial crisis and specifically, the bankruptcy of Lehman Brothers and the near collapse of AIG.

At that time, the private public sectors saw the problem and together came up the LEI as the solution. “We think that the story of how this happened may be instructive for attacking the much larger and more vexing problem of providing legal identity to all, including birth registration, by 2030,” Hodash said.

“The ID2020 Summit demonstrated the clear commitment of the surrounding community to the goal of universal identity,” said John Edge, Co-Founder/Board Chair of ID2020. “To capitalize on this momentum, ID2020 will work with its public and private-sector partners to identify technical and regulatory standards, accelerate access to appropriate technologies, and advocate for identity as a centerpiece of global development.”

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