Transacting in the worldwide financial system requires you to get a Legal Entity Identifier (LEI). Whether your business is based in an offshore destination or abroad, it’s easy to get LEI. It’s a good idea to have LEI, especially if you run a business incorporated offshore, to enhance transparency regulations. You should note that a Legal Entity Identifier can increase legitimacy, credibility, and trust when doing your business.
Various mandates are in existence that prohibits companies without LEI from trading. This means traders and reporting parties need a Legal Entity Identifier. Because the LEI is increasingly becoming popular, and various benefits are now being uncovered, such as streamlining banking processes. There is a chance that your business needs to get the LEI. This post discusses why you should have a Legal Entity Identifier.
The Legal Entity Identifier
The LEI was endorsed by the G20 and is a globally verifiable unique identity code. You should remember that the LEI code has a record with details about a business, such as its group structure and identity. The LEI is now considered the single most crucial identifier of the world’s financial ecosystem. The LEI undoubtedly has significant benefits, including increasing transparency in capital markets, banking, and many more.
As explained earlier, the LEI is simply a code unique to a company, such as a fund or trust, limited company, or any other organization. This code has a combination of 20 numbers and letters. The code allows you to identify each entity on a global database of legal entities that you can search by number rather than by name. For example, you can use LEI search to check the LEI status of a company. This is helpful because several entities share the same or similar names. This code is an ISO standard, making it a legal requirement for most companies operating in the global financial system.
The code is the best way to identify market participants on a standardized and single database. This provides the correct data about a legal entity that is accessible and free of charge to use. The LEI record of a company can have public data like their name, address, where they are located, where they are registered, or whether or not another parent company owns it. There are millions of LEIs around the globe, and it’s now being used as a global standard for most business transactions.
Why you should get a Legal Entity Identifier?
It’s important to know who is who in today’s markets. In a global marketplace, you must make sure that you know who you are doing business with. Your potential investors or overseas clients may desire to know who you are before dealing with you. Therefore, you need to have a Legal Entity Identifier to prove that you have a registered entity and own the company.
Before you get the Legal Entity Identifier, your entity must be verified by utilizing the local company’s registry. This tends to prove that your company is active. They cannot issue the LEI until they confirm all the data. The LEI has become a reliable identifier for many lawmakers and regulators.
Previously, the national companies’ registry search tools were usually used when doing company checks. These ensured that your company was registered, but it can be hard to find the appropriate website, database, or search tool to conduct a company search.
The good news is that the LEI offer the same tool, a standardized and single global scale. This means that the LEI give the exact company details regardless of the industry or jurisdiction. This improves KYC processes and workflow, consolidating many national registries into a single search tool.
It’s worth noting that national company registries may offer a certificate of incumbency or incorporation, which can include a company registration identity. But you can use these to prove the existence of your business. In other words, these are only valid at the national level. On the other hand, the LEI certificate can be a more convenient and suitable document. You can be eligible for the LEI certificate when you get the LEI number. This certificate can replace traditional certificates because it’s internationally recognized. Several companies can sell you the LEI certificate you can give to your potential investors, customers, or regulators.
Some people are skeptical of dealing with businesses operating outside of offshore jurisdictions. The good thing about the LEI is that it provides a cost-effective, convenient, and trustworthy way of dealing with these companies. If your company is registered offshore and you operate internationally under another business name, the LEI provide several options for how you can do business. This is because naming options tend to be flexible.
You can also decide to list a parent company’s information to have an ownership map of your company’s structure. This can include direct parents, ultimate parents, and branches. As you can see, it’s a simple and effective way to show the world that your company is legitimate when you have the LEI.
You should also note that having the LEI can be heavily regulated in most parts of the world. Ideally, if you run a business internationally, especially in the US, EU, and the UK, there is a good chance that you may have to get the LEI for reporting purposes. Therefore, you need to determine whether or not you need to have the LEI before you do business in these countries.
Above all, there is a shallow barrier to getting the LEI. Applying for the LEI is pretty easy, and the process may just take a few minutes. Any entity that is regarded as a legal entity can get the LEI. This includes charities, limited companies, funds, trusts, associations, banks, and government bodies.
