A Legal Entity Identifier (LEI) is a 20-character, alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization (ISO). It is used to uniquely identify legally distinct entities that engage in financial transactions and participate in the global financial market. The LEI system was conceived as a key measure to improve the quality and accuracy of financial data systems for better risk management post the 2008 financial crisis.
Origination:
The LEI system was developed in response to the inability of financial institutions to identify organizations uniquely, which became apparent during the 2008 financial crisis. This lack of transparency was identified as one of the most significant contributors to the severity of the crisis. As a result, the G20, in partnership with the Financial Stability Board (FSB) and several international regulators, called for a global identification system. The LEI was officially endorsed by the G20 in 2011, and the Global Legal Entity Identifier Foundation (GLEIF) was established in 2014 to support the implementation and use of the LEI.
Usage in Payments and Banking:
In the banking and payments world, LEIs are used to facilitate a clearer and more efficient identification of transaction counterparties. Financial institutions use LEIs for regulatory reporting purposes, and the identifiers are critical for managing counterparty risk, ensuring compliance with anti-money laundering (AML) regulations, and enhancing the accuracy of financial data.
How to Get an LEI:
To obtain an LEI, an entity must apply through a service provider known as an LEI issuing organization or Local Operating Unit (LOU). These organizations have been accredited by the GLEIF to issue LEIs. The process typically involves:
- Selecting an accredited LEI issuer.
- Providing necessary information about the legal entity, such as official registered name, address, registration number, and company type.
- Paying the required fee, which may vary depending on the issuer and the services provided.
Correcting Information in an LEI:
If there is an error in the LEI data or if the information needs updating, the entity must contact the LOU that issued the LEI. The LOU will then guide the entity through the process of updating the information, which generally involves submitting official documentation that verifies the changes.
Is LEI Open-Source or Private?
The LEI is neither open-source in the context of software nor is it private. It is a public data system, meaning that the information contained within the LEI repository is openly accessible to the public. The GLEIF ensures that the LEI data pool is a unique, free source of global legal entity identification information.
Can Anyone Look It Up?
Yes, anyone can look up an LEI. The GLEIF provides a database that is accessible online, where LEI data can be searched for free. This search can provide information such as the legal name of the entity, its address, and the jurisdiction of incorporation, among other details.
What If I Am Not in the LEI?
If an entity is not in the LEI system, it simply means that it has not been required to obtain an LEI, or it has not voluntarily chosen to do so. While the LEI is mandatory for certain financial transactions, particularly those involving securities trading and reporting in many jurisdictions, not all companies are required to have one. Entities not involved in financial transactions that are required by regulation to report an LEI will not be impacted. However, entities involved in activities that fall under such regulatory requirements will need to obtain an LEI to comply with the relevant laws and regulations.
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This page was last updated on November 5, 2023.
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