15May 2019
May 15, 2019

Legal entity identifier – LEI code – EUR 500

The Legal Entity Identifier (LEI) is a global identifier of legal entities participating in financial transactions. It is based on ISO 17442. One legal entity can be assigned only one LEI code.

LEI number can be obtained not only by a company (including subsidiaries), but also by a foundation, a trust, non-profit / charitable organization, government organization, individual entrepreneurs, and affiliates. LEIs cannot be assigned to individuals and operation units. These units have to use their parent organization code.

Who needs LEI code and why?

At the beginning of 2018 EU requested that all legal entities involved in financial operations obtain a LEI code. Moreover, even regulators in many countries outside Europe already require that legal entities have a LEI code. It is expected that LEI codes will be used for KYC procedures worldwide in the future.

Having a LEI code increases the credibility of the company. It also simplifies the work of the bank and generally increases the chances of account opening.

Global Legal Entity Identifier Foundation (GLEIF) and the Loudhouse agency conducted a survey in which they attempted to identify the main problems associated with the identification of legal entities in the financial sector. 102 representatives in banks were interviewed, US (35 people), UK (34) and Germany (33).

The study showed that 6 out of 10 (57%) sales managers in banks spend more than 1.5 days a week, that is, 27% of their entire working week, to check information about new clients. KYC usually takes about 1.5 month. The essence of the problem is the lack of a standardized approach to the verification of companies.

Consequently the GLEIF Foundation proposed an interesting standardized solution – the use of a single, generally accepted method – LEI code. Today, legal entity identifiers can easily be obtained in different places worldwide.  LEI Global Index is the largest publicly available online resource where banks can obtain standardized and thoroughly verified reference information about companies. In this open system, information is regularly updated without error. GLEIF is a non-profit organization that aims to promote the implementation and use of LEI code.

How is LEI code number structured?

Each LEI number contains information about the ownership structure of companies and thus reveals the identity of the company.

LEI code has 20 digits, out of which:

  • First 4 digits identify the local operation unit (LOU) that issued LEI code;
  • 5 and 6 digits are reserved and always set to 0;
  • The following 12 digits represent a unique identifier of a legal entity that is generated according standardized rules;
  • Digits 19 and 20 are control digits according to the ISO standard.

If you wish to apply for LEI code and increase your chances of bank account opening, please contact us at info@offshore-pro.info.

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