LEI, which stands for Legal Entity Identifier, is a 20-digit numerical code that is used to designate parties engaging in financial transactions all over the world. It was set up to increase the clarity and efficiency of financial data reporting tools to successfully manage risk. It’s used to build a global reference information system that recognizes a specific legal entity involved in a financial transaction, regardless of country.
What is GLEIF?
The Global Legal Entity Identifier Foundation (GLEIF) was formed by the Financial Action Task force in June 2014 to facilitate the adoption and usage of the Legal Entity Identifier (LEI). The LEI Regulatory Oversight Committee, which represents government entities from around the world who have joined forces to advance openness in the global financial system, supports and oversees the organization. GLEIF is a non-profit international organization based in Basel, Switzerland.
GLEIF and LOU
The Global LEI System’s functional reliability is ensured by GLEIF facilities. GLEIF is constantly increasing the level and quality of information collected in the LEI data repository, as well as making public flow of information easier. It’s available via any of the Global Legal Entity Identifier Foundation’s (GLEIF)-accredited Local Operating Units (LOUs). Legal Entity Identifier India Ltd. (LEIL) is an issuer of LEI recognized by the Reserve Bank of India.
The LEI number ties to essential reference data, allowing for the unambiguous and distinct verification of legal organizations involved in financial activities. Each LEI comprises a well-organized database divided into two sections: Level 1 identifies who is who, and Level 2 identifies who belongs to whom. Level 1 data provides information about an entity’s enrollment, such as its legal name, license plate, legal and headquarters addresses, and so on. Level 2 shows the information of an entity’s institutional ownership, thereby addressing the question of who belongs to whom. Simply explained, the publicly viewable LEI data source converts unstructured business user information into a standardized global index, considerably increasing market visibility.
Who requires LEI?
When both the sender and the recipient are common people engaging in some form of financial transaction, the LEI is not necessary. However, LEI will be required for financial transactions that involve non-individual entities. Examples of non-individual entities are large corporations, banks, funds, organizations, etc. Any two non-individual entities who are engaging in financial transactions require LEI to do business.
What is the aim of an LEI?
The LEI program was created in reaction to the economic meltdown, and it aims to improve business data sector transparency. There are multiple methods for recognising entities in different marketplaces and nations at the moment. When fully implemented, the Global LEI System (GLEIS) will make sure that there is only one common reference. There are a variety of laws that demand the usage of LEIs in different countries. However, the major goal of the Global Legal Entity Identifier is to make it easier to identify any legal entity everywhere in the globe by simplifying, unifying, and standardizing the process.