The LEI future eliminates unnecessary data duplications for clients and financial institutions.
Legislators have increasingly called for greater transparency in domestic and especially international financial transactions in recent decades. This is due to the need to curb crime, notably terrorist financing and money laundering.
The regulatory environment has progressively extended the list of information that must be collected and stored about customers to achieve this.
This has led to a double burden: on the one hand, Anti Money Laundering (AML) and Know Your Customer (KYC) regulations and the related mandatory administration became stricter every year; on the other hand, the democratization of the market also forced traditional institutions to move to a higher level of customer experience.
The market has found the possibility of significant improvement primarily by removing redundant activities in the issuance of legal entity identifiers (LEIs).
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What is the LEI?
The LEI code stands for Legal Entity Identifier, used to uniquely identify a company, akin to
a unique tax number. It is required for all firms that have an investment account whether or not they engage in a single derivative transaction. An LEI code can only be assigned to one company, and if a firm has more than one investment account, it must have only one LEI code.
The LEI code consists of 20 alphanumeric characters (a mixture of numbers and letters), according to The International Organization for Standardization (ISO) 17442. It can be used worldwide to uniquely identify a legal entity involved in financial transactions, which includes:
a stock exchange company;
LEI on a global level
The LEI code was designed to improve market-wide transparency by the Global Legal Entity Identifier Foundation (GLEIF) in June 2014. The Regulatory Oversight Committee, which represents public authorities worldwide that have joined forces to advance openness in global financial markets, supports and oversees the foundation.
The Global LEI Index is made accessible by GLEIF, the only global online source of open, standardized, and high-quality legal entity reference data. GLEIF makes it possible for consumers and organizations to make better, less expensive, and more responsible business decisions.
Consumers and organizations to make better, less expensive, and more responsible business decisions.
Implementing a new Validation Agent Framework inside the Global LEI System has aided efficiency, a move that may eliminate many of the pain points previously experienced by customers and financial companies during onboardings.
GLEIF oversees a global network of issuing organizations that provide trustworthy services and open, accurate data for unique legal entity identification. The purpose of the LEI initiative's backers was to utilize the LEI to promote transparency in the derivatives markets following the financial crisis.
The LEI's ability to help existing tedious processes isn't limited to KYC. With the growth in fraudulent activities, more regulatory scrutiny, and a more important requirement for precise and trustworthy data for client identification in payment transactions, the LEI has become an essential property for automated transaction due diligence on the flight of a payment.
According to the GLEI vision statement, when wholly implemented by market participants, the Global LEI Index will eliminate the time and effort required to maintain entity reference data, allowing market players to save money, simplify and speed processes, and acquire a better understanding of the global marketplace.
If you want to learn more about LEI, you can read it in our article by clicking on the link. Learn more