A Legal Entity Identifier (LEI) is a unique global identifier for legal entities involved in financial transactions. It is designed to uniquely identify organizations such as companies or government entities that participate in financial transactions, but not individuals.
The LEI system helps regulatory authorities and financial institutions clearly identify legal entities to improve transparency and risk management across global financial markets. LEI data includes information about the entity and its ownership structure, answering the questions of "who is who" and "who owns whom." The system was developed in response to the 2008 financial crisis to address the lack of a universal identification method for financial institutions worldwide.
How to Read LEI Code
LEI is a 20-character alphanumeric code based on the ISO 17442 standard that is verifiable globally. Here’s how to “read” the code:
- Characters 1 to 4: Local Operating Unit (LOU) Identifier, which identifies the organization that issued the LEI.
- Characters 5 to 6: Reserved characters set to "00".
- Characters 7 to 18: Unique alphanumeric string specific to each legal entity, distinguishing each entity in the global LEI system.
- Characters 19 to 20: Two checksum digits used for validation of the LEI according to the ISO 17442 standard.
Who Uses LEI?
LEI is used by a wide range of organizations primarily involved in financial transactions. This includes banks, investment firms, insurance companies, funds, corporates, and government entities. It is used by entities participating in financial markets to uniquely identify themselves in trading, regulatory reporting, and risk management.
Regulators require entities to have an LEI for transparency, compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations, and to improve the quality and accuracy of financial data. The LEI is also used in Know Your Customer (KYC) processes, due diligence, and streamlining client onboarding.
Essentially, any legal entity entering into financial contracts or regulatory reporting may use or be required to use an LEI. You can try conducting a LEI search.