Nothing highlighted the need for a global financial identifier system like the 2008 global crisis. Prior to this, each country had its own code systems that didn’t easily allow regulators to identify the counterparty in a transaction.

The G20 created the LEI concept and a not-for-profit, the Global Legal Entity Identifier Foundation (GLEIF), to oversee it. The Foundation doesn’t issue the codes itself, rather it accredits Local Operating Units to do so.

What is an LEI?

An LEI Code is a globally recognized alphanumeric code that uniquely identifies a legal entity that wishes to take part in financial systems. An LEI is not just a regulatory requirement, it also serves as a brand protection tool and a way to securely connect businesses. Many banks and financial service companies have started to require LEI codes from their customers as part of their KYC processes.

The global financial crisis of 2008 revealed the need for a solution to easily identify and verify counterparty corporations in cross-border transactions. Until this point, each country had their own code system that made it difficult to understand who owned which corporation within the complex organizational structures of larger entities.

When the world’s largest economies came together to solve this problem via the G20 and Financial Stability Board, they created a solution called the Legal Entity Identifier (LEI). An LEI is a 20 digit code that identifies legally distinct corporate entities that wish to engage in financial markets. Its centralized database is publicly accessible and verifiable worldwide.

LEIs are used to identify regulated financial institutions as well as those who trade OTC derivatives, issue debt, manage funds, and other activities subject to regulatory reporting obligations. The GLEIF is the not-for-profit that manages the LEI registration and issuance system. It also provides a free and public directory of all LEIs, along with their associated reference data.

Unlike DUNS or other proprietary identifiers, an LEI can be used by any type of business. While it is not a prerequisite for doing business, the benefits of having an LEI include improved transparency in financial markets, standardization and greater risk control. The ability to link data sets also helps to improve analysis and allows for better understanding of an entity’s risk exposures.

The process for obtaining an LEI is quick and simple, typically taking only a few hours. The first four digits of an LEI identify the LEI issuer, known as the LOU, while digits five through to six always have a value of 0. Characters seven through to 18 are unique to each legal entity and the final two digits are check digits defined in ISO 17442 standards.

How do I get an LEI?

An LEI code is a globally unique alpha-numeric code that identifies legal entities on a global scale. It offers transparency on the financial market by confirming the identity of legal entities and providing details about them. Legal entities can be individuals (such as sole traders) or companies, trusts, foundations and other organisations that are recognised by law. A legal entity must be registered in an official business registry to receive an LEI.

The G20 and FSB launched the LEI system in 2011. A single registration authority oversees the assignment of LEIs, making sure they are always accurate and up to date. Once an application has been submitted with the correct reference data, a new LEI can typically be issued within hours.

To apply for an LEI, you need to fill in a simple online form. You need to provide details about your organisation such as its legal name, the registry it is registered in, its registration number and the details of its legal and headquarters addresses. This information is referred to as Level 1 data and answers the question ‘who is who’.

You can also choose to report Level 2 data which identifies the parent company of your organisation. You can include information such as the legal parent name, the country of its incorporation and the managing LOU.

Once the LEI application has been submitted, it will be published in the GLEIF database and a notification will be sent to you. In some cases you might be required to submit additional documentation before your application can be processed. This is to ensure that your information is valid and to help you comply with local regulations such as Mifid II, EMIR or CSDR in the USA.

Once your LEI has been issued, you will need to renew it annually. The annual renewal fee covers administration costs, regulation updates and system maintenance. It is a good idea to renew your LEI as soon as it expires, especially if you are operating on financial markets where the use of an expired LEI may result in operational disruption.

What are the benefits of getting an LEI?

An LEI is a unique 20 digit code that helps identify a legal entity on a global database of entities as illustrated on NordLEI’s website. LEIs allow regulators, financial markets and businesses to easily identify and reliably connect with any legal entity irrespective of its name, location or ownership structure. This enables greater transparency and efficiency in today’s global financial system.

Each LEI Code is unique and published in the Global LEI System – a public global directory of millions of organizations. The directory provides identity reference data, including an organization’s legal name, registry of registration, registration number, country of origin, legal form, and whether it is a branch or owned by another incorporated entity. The directory is accessible to all and can be used for many different use cases such as financial transactions, KYC (Know Your Customer), and client onboarding.

As the global standard for business identification, an LEI is required by regulation for any legal entity carrying out or operating within today’s financial system. Many of the world’s leading financial regulators (including the US Securities and Exchange Commission, the Commodity Futures Trading Commission, and the European Union) have adopted rules that require companies to get an LEI and use it in their regulatory reporting and transaction reporting systems.

There are also a growing number of commercial use cases for the LEI, from corporate trust services to improving the reliability and accuracy of cross-border bank remittances and reducing costs associated with the transfer of funds between banks. In addition, the LEI is becoming increasingly used by organizations as a way of promoting their reputation for integrity and compliance with regulations. It can be reported in media releases and displayed on websites, press releases, site seals, QR codes and barcodes.

The Global LEI System is supported by a network of Local Operating Units (LOU) that provide services to their local markets. The LOUs are regulated by the Global Legal Entity Identifier Foundation to ensure that they meet rigorous requirements for data quality and transparency. Local Operating Units are charged an annual fee to cover the cost of operating the Global LEI System and a portion of these fees is shared with the non-profit Global LEI Foundation.

How do I renew my LEI?

The LEI is a requirement for global compliance and brings added brand protection for companies. Staying up-to-date with regulatory requirements also helps to keep your company protected from identity theft and fraud, which is why many banks and financial service companies ask for an LEI check as part of their KYC (know your customer) process.

The benefit of the LEI goes beyond just complying with global regulations; it also provides transparency and standardization to global markets. It allows market participants to identify legal entities across national boundaries and makes it easier to compare business information such as corporate structure, ownership details and trading history.

An LEI is a unique international code for legal entities that participate in financial markets. It is free of charge and provides transparent, standardized information about the legal entity that owns or controls a corporation. The Global Legal Entity Identifier Foundation (GLEIF) oversees the production, distribution and maintenance of the LEI system.

LEIs are not required for all legal entities that participate in financial transactions, but those that do must have an LEI to be compliant with the major global regulators. A number of the world’s largest economies have adopted the LEI as a global standard to identify and uniquely identify market participants.

Companies and legal entities need to have their LEI codes renewed annually to ensure they remain active in the Global LEI Index. If the LEI is not renewed, it will be displayed as LAPSED in the GLEIS and this can lead to blocked trades or payments, complications with financial service providers and potentially fines from the regulator.

A company or legal entity can renew its LEI through an LEI Issuer, which is known as a Local Operating Unit (LOU). The LOUs may be accredited by the GLEIF to issue LEIs and must maintain the same standards of accuracy and completeness of data as the Global LEI Foundation.