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What is the purpose of Legal Entity Identifier

What is the purpose of Legal Entity Identifier

LEIs or Legal Entity Identifiers are unique reference codes for accurate identification of any legal entity engaged in any financial transaction. The entity can be banks or finance companies, Government departments, trusts, municipal corporate entities, partnerships, charities, financial intermediaries; entities that trade in debt or stocks, or in investment agreements like private equity funds, hedge funds, umbrella funds; and any global entity that is listed on an exchange and so on. LEI can link directly back to the critical data on the transacting entity or the ultimate ownership of that entity.

LEI was introduced by an international organisation known as Financial Stability Board who promotes supervisory policies and develops the implementation regulatory relating to the worldwide financial system.

The purpose of standard LEI:

In this system all parties have to be registered and assigned with an individual code. Therefore, the identification of both parties in a financial transaction becomes easier. This system is initiated to improve the transparency in the financial data system and most importantly to prevent any financial crisis of any legal entity in the globe. The Global LEI system is a standard system that enables all regulators a total exposure for a better understanding and to facilitate monitoring any systematic risk. Legal Entity Identifier has provided a better opportunity by increasing the efficiency of risk management through the revelation of the counterparties in financial transactions.

The benefits of LEI:

Through this twenty characters alphanumeric unique code you can find data record which include, the official name of the legal entity according to the official registers, the country where the entity is formed, the address in details, the status of the entity, the codes for the subdivisions, and other information like the first date of LEI assignment, the last update and the date of expiry. Now any legal entity situated anywhere in the world can find out any information related to financial transaction of other legal entities. This system will help to reduce financial frauds and market abuses.

Also Read: LEI Data – Making Financial Transactions Easier And Safer

 

The best part of LEI is, it is a very easy process and any individual can access these information from anywhere in the world. The interested party needs to find a search portal based on LEI system and provide the company name or the LEI code to avail the details. One can also try to find an entity by their status and their country of operation. These data can also be downloaded for future references.

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