Following the Global Financial Crisis, the Legal Entity Identifier (LEI) code was created as a vital measure to improve the quality and accuracy of financial data systems to improve risk management in financial transactions. This is now a mandatory code that an entity needs to have in order to conduct business globally. Not having one will only result in the entity lagging behind in terms of capability. Firms, like other identifiers, require them to comply with financial regulations and directives in order to meet their reporting requirements.
It’s preferable to have something and not require it than to require something and not possess it. In today’s competitive business world this is the saying that gets most entities by in scenarios where they are left with no other option. This comes true in case you are trying to make transactions across geographical borders, where trust in your identity, Global Validation, Legitimacy, and Compliance are the factors that can make or break a deal. An LEI number is a simple code that establishes all the above-mentioned and gets the job done.
LEI number is simply a mandatory code that a company requires in order to be able to successfully process financial transactions, across borders or within the geographical boundaries of a country. While this does not hold true for all countries majority of the countries today do follow this and mandate an LEI number as compulsory for a firm or an entity.
What is the significance of it?
As a reliable, open, harmonized, and high-quality legal entity reference data exchanged across the marketplace, LEI will enable cost savings and new business opportunities. Through a free and open database updated on a daily basis, the LEI provides a unique identification for all entities engaged in financial transactions that may also be utilized across borders. This universal paradigm is essential for properly defining each risk in financial transactions, creating transparency, and conducting market surveillance.
The reason why you should get it.
Over 1.6 million entities currently rely on the ISO standard for their regulatory and worldwide business needs, and the LEI is quickly becoming the key global corporate identification. Any requirement for an LEI will be imposed by national or international financial regulators. The Commodity Futures Trading Commission is currently the only authority that requires the use of an LEI for entity identification (CFTC).
Where to get the LEI number?
If you need an LEI number or code, there are a number of companies that provide convenient and secure registration services. If you’re having trouble deciding, go with the one that GLEIF has designated as your country’s official LEI code registration agency.
Conclusion.
Your financial service provider will require your Legal Entity Identifier if you are a business entity, public body, council, charity, or trust. If you want to trade after January 3, 2018, you should apply for an LEI. While there is no regulation requiring enterprises or entities to obtain an LEI, individuals with registered businesses must apply for LEIs in order to do business in the EU, the United Kingdom, or the United States.