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Important things about LEI

 

The Legal Entity Identifier (LEI) initiative is designed to create a global reference data system that uniquely identifies every legal entity, in any jurisdiction, that is a party to a financial transaction. More specifically, LEI is a unique 20 digit code that is assigned to a legal entity.

We will discuss some of the important things about LEI in this article. But let us first start with knowing What is Legal Entity Identifier?

A Legal Entity Identifier (LEI) number / legal entity code is defined as a unique 20-character alphanumeric string (i.e. 529900T8BM49AURSDO55).

The meaning of an LEI is to define a Legal Entity (such as company, organization, firm, government body, trust, fund, etc) on a worldwide basis, and to identify transacting parties within financial systems. Once issued, the Legal Entity number can be used to represent the Legal Entity in financial transactions or use-cases requiring verified organization identities.

LEIs are required by all parties participating in regulated transactions. They provide a publicly available verifiable source of ‘who is who’ (organization identity) and ‘who owns whom’ (organization group structures).


What type of Legal Entity can apply for a Legal Entity Identifier?

A Legal Entity number may be obtained for any of the following ‘Legal Entities’:

  • Registered Companies* and Registered Subsidiaries*
  • Non Profits
  • Sole Proprietors (Having a distinct identity within a business register)
  • International Branch offices (The Head Office must already have an LEI)**
  • Funds and Trusts


Who may NOT apply for a Legal Entity Identifier?

An LEI may not be requested by any of the following:

  • Individuals
  • Operating divisions
  • Branch offices within the same country as a head office with an existing registered LEI

 

Who is the GLEIF?

The Global LEI Foundation (GLEIF) is a not-for-profit body established by the Financial Stability Board (FSB) and overseen by the LEI Regulatory Oversight Committee (LEI ROC). The GLEIF is tasked with managing the Global LEI System (GLEIS).

GLEIF is tasked with running the system on a global basis ensuring consistency and accuracy through data quality programs, reporting, and their open data policy.

Who needs a Legal Entity Identifier?

1.8+ million organizations, trusts, and funds now have LEI. It is firmly established as the global code to identify ‘who is who, and ‘who owns whom.

LEIs are required for many financial regulations in financial markets such as MiFID II, MiFIR, Dodd-Frank Act, EMIR, and more. Organizations attempting to trade under these regulations without an LEI Number will be unable to transact, or risk being fined. Over 100 regulations require Legal Entity Identifiers, with additional regulations mandating inclusion going live every month.

Because they contain valuable, accurate and transparent identity data attributes, the LEI enables high levels of trust in an organization’s legitimacy and identity. Increasing numbers of data providers and credit check organizations utilize Legal Entity Identifiers in Know-Your-Customer (KYC) and client onboarding processes.

Final Thoughts

LEIs are the best good solution to solving the issues associated with the less standardized, and less mature organizations domain to improve KYC, digital assurance, and more.

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