Everything you need to know about LEI Codes: A guide for businesses
LEI codes are a global standard that helps identify legal entities that engage in financial transactions. Get a complete understanding of the importance and necessity of LEI codes for legal entities involved in financial transactions.
What is an LEI Code?
An LEI Code, or Legal Entity Identifier, is a unique 20-digit alphanumeric code used globally to identify legal entities that engage in financial transactions.
The structure of an LEI Code is set by the ISO 17442 standards and consists of three parts:
- Characters 1-4: Identification of the LOU (Local Operating Unit).
- Characters 5-18: Identification of the legal entity.
- Characters 19-20: Verification of their identity.
This specific design of the LEI Code ensures that no two codes are the same and that all investors, traders and financial institutions can identify and verify the legal entities they work with in a clear and unambiguous way.
The purpose of an LEI Code
The purpose of the LEI Code is to increase transparency and security in financial transactions by providing a unique identification of legal entities. By having an LEI Code, financial institutions, investors and regulatory authorities can easily identify and track transactions, risks and exposures between different legal entities. This helps prevent fraud, money laundering and other illegal activities.
Who needs an LEI Code?
It is particularly necessary for companies and legal entities that engage in financial transactions, trade in shares, bonds and other types of securities to acquire an LEI Code. The requirement also applies to financial institutions, insurance companies, pension funds and all other types of institutions and companies that carry out financial transactions. This obligation is due to international rules and regulations.
How to apply for an LEI Code
To apply for your first LEI code, you need to complete a number of steps. These include collecting all required documents, filling out the application form and paying the application fee.
Step-by-step guide to the application process
- Identify an LEI issuing organization: There are many of these around the world and you may need to compare prices and services.
- Fill out the application form: The information in the application must be correct.
- Pay the application fee: Fees vary depending on the chosen LEI issuer.
- Wait for the approval process: This can take anywhere from a few hours to a few days.
- Receive and activate your LEI: When you receive your LEI, you need to activate it according to the information provided by the LEI issuer.
Buy your LEI code at Leiserviceaustralia.com
What happens if you don’t have an LEI Code?
A missing LEI code can have serious consequences for legal entities engaging in financial transactions. Without an LEI code, companies may experience delays or rejections of transactions and be in violation of international rules and regulations.
