Category: India

What is a Legal Entity Identifier? The LEI or Legal Entity Identifier is a 20 digit unique character or identification code assigned to a company that can be used worldwide to help identify for your transactions, business purposes, and regulatory reporting.  The LEI system was initiated by G20 in 2011 and is overseen by the Global Legal Entity Identifier Foundation (GLEIF) that sustains the structure, policies, and activity of the system known as the Global Legal Entity Identifier System (GLEIS). GLEIF helps businesses around the world to access the open database where you can verify any LEI. GLEIF helps legitimate international or national trade in the financial market. Why is LEI used in the Indian as well as Global Market? In the aftermath of the Global Financial Crisis, it became apparent that it was a complex order to do business with new entities without the online presence of the organizations and un-standardized global identification methods. It was crucial to do overseas business without the fear of fraud and money laundering, but also to recognize counterparties in transactions with a clear way of ensuring their identity. It was time-consuming and difficult for financial institutions to provide transparency and keep track of suspicious transactions resulting in more online theft. It was also difficult to onboard new customers from overseas with no clear way of identifying them. In the UK the companies house code is regularly used, in India it is often the IEC Code, CIN, GSTIN, or UAN.   After the introduction of the LEI system in 2011 by the G20, it became very easy to track these transactions and not just track but LEI helps organizations to globalize their business. Regulators began to have more clarity around who is doing business and could more easily identify market participants and their counterparties on an international basis. With one identifier common to businesses of all forms, types, and jurisdictions the confusion around identifiers was solved.  GLEIF was appointed to monitor and certify all the financial institutions and to issue LEIs. The institution which can issue LEI is known as a Local Operating Unit (LOU).  Entities that register to get an LEI, benefit from increased credibility, higher standards of compliance to international regulatory requirements, and can obtain an LEI certificate which serves as an international business passport and proof of identity/existence. It is for the simple reason who use the LEI number can be tracked or monitored by regulatory bodies and are legitimate, which improves transparency between companies. It also allows vendors, stakeholders, and business to identify their prospective clients and help them check their real-time data. This saves time by replacing old, outdated KYC methods (research conducted by McKinsey estimated that if the global banking sector adopted the LEI system for onboarding, it would save them 2-4 billion USD annually).  Organizations with many branches can also be benefit from getting an LEI as it allows them to distinguish between their different branches around the world. The LEI is one of the only identifiers that can show organizational structure within a corporation or group of companies, finally showing us “Who is who, and who owns whom”. Who can get the LEI in India? If we said, “everyone” it would not be wrong. Every entity that can be considered a ‘legal entity’ may apply for an LEI. As online trading increases and we become more digitized, the LEI system will become more heavily regulated and a number of factors will drive LEI adoption rates. There are currently 1.8 million LEIs in existence, and the GLEIF predicts there will be as many as 20 million by 2027. If you would like to find out more about LEI codes in India, you can visit the page all about LEI codes in India. How to get an LEI in India? In spite of the fact that you are a financial institution filing for an LEI on the behalf of your client or you need to register for your own company, the procedure remains the same.  For personal assistance or any other queries, you can go to a website such as LEI Worldwide and contact them for direct support and you will get a solution according to your LEI needs.   This blog piece is authored by Sneha Vats (LEI Worldwide)