Navigating the complexities of today’s business world requires organisations to use tools that provide clarity and accuracy. The Legal Entity Identifier (LEI) is one tool that benefits financial institutions of all sizes. An LEI number is a 20-character alphanumeric code that serves as an identifier for legal entities engaged in financial transactions. It is issued by accredited Local Operating Units (LOUs), and as of 2021, it’s compulsory for organisations involved in financial transactions in many countries, including the European Union and the US.
If you want to know “what is LEI?“ and how it can benefit your business, keep reading.
What is LEI?
An LEI is a unique alphanumeric code that identifies legal entities participating in financial transactions. It provides an accurate and consistent way to identify companies, trusts, and other organisations worldwide. It helps to reduce errors, facilitate compliance with regulations, and improve operational efficiency within the global financial system.
Having an LEI number is essential for any business that wants to engage in financial transactions successfully. It ensures that the company can confidently transact with other entities, maximise the accuracy of data sharing, and reduce costs associated with legal compliance. It also supports investors by providing detailed information on a particular entity’s corporate structure and related activities and transactions.
Why is Acquiring an LEI Number Important?
An LEI number offers essential advantages to any business, including the following:
- Accurate data sharing:
Did you know that the data used in many financial transactions are only sometimes accurate? Without an LEI number, companies may risk making inaccurate payments or sharing incorrect information with other parties. An LEI ensures that all information is accurately represented, leading to fewer mistakes and improved compliance.
Many financial institutions require that their counterparties provide an LEI before engaging in financial transactions. It helps to reduce the risk of incorrect payments and fraud.
- Improved operational efficiency:
Having an LEI number simplifies the process of financial transactions, as all parties involved can quickly access information regarding a company’s corporate structure and activities. As a result, it streamlines the process of completing transactions and reduces associated costs.
- Enhanced compliance:
An LEI number helps companies meet global requirements for legal entities participating in financial transactions. It enables businesses to quickly identify their counterparties and provide accurate information to regulators and other stakeholders. It can help reduce the risk of regulatory penalties and other legal liabilities.
- Improved data quality:
An LEI number ensures that the data used in financial transactions are reliable and up to date. It helps to reduce mistakes and improve the accuracy of reports. It also provides investors detailed information about a particular entity’s corporate structure and related activities and transactions.
- Improved investor confidence:
An LEI number helps improve investors’ confidence in a company’s financial transactions. It provides detailed information on the corporate structure, activities and related transactions of a legal entity. It can help attract more investors and increase capital inflows into a business.
- Reduced costs:
Having an LEI number helps companies save on the costs associated with legal compliance. It also reduces the need for manual data entry and other operational costs.
As you can see, acquiring a Legal Entity Identifier is critical for any business that wants to engage in financial transactions successfully. It ensures accurate data sharing, improved operational efficiency, enhanced compliance, and improved investor confidence. In addition, it reduces the costs associated with legal compliance and data entry. By obtaining an LEI number, businesses can ensure that their financial transactions are secure, compliant, and accurate.