Sat, 28 Jan 2023

An LEI code could be vital to your supply chain if you conduct international trade. It is a unique identifier created by the International Organization for Standardization (ISO) that businesses can use to identify organizations or entities engaged in cross-border trade and investment. They are used primarily by parties in financial transactions to ensure they have the correct information about the party they are doing business with. You can easily find out information about a particular entity by using an online LEI checker.

Importance of LEI (Legal Entity Identifier) code

Verify the identity of the financial entity

An LEI code is like a passport number for an entity. It is a unique identifier that a company can use to verify the entity's information in a transaction and to improve transparency by allowing different parties in a supply chain to validate that they have the correct information. LEI codes have certain levels of permanence and lasting uniqueness. A company or organization can use an LEI code for as long as it continues to conduct international trade activities. It does not identify specific individuals at organizations; instead, it identifies the organization itself.

Improve efficiency in international trade

The LEI Code aims to improve the security and efficiency of international trade by providing a unique identifier for parties engaged in cross-border transactions. A business can use the LEI code to create greater financial transparency in international trade, although this is not necessarily a core goal of the LEI Code. These codes will make it easier for businesses to identify which party they are working with and help them comply with regulations on Anti-Money Laundering (AML) and Know Your Customer (KYC).

Legal entities are often involved in complex supply chains.

Legal entities are often involved in complex supply chains, especially when the goods and services traded include products that can be acquired from several different sources. An LEI code helps ensure that all parties in the chain know which party they are dealing with and what legal requirements are on them.

Many international financial regulatory bodies have mandated legal entity identification.

In order to conduct cross-border trade, legal entities must possess reliable identification, as mandated by the Financial Action Task Force, the International Monetary Fund, and the World Bank, among others. In addition, the FATF and the Financial Stability Board (FSB) have jointly issued a recommendation on Information Sharing to identify financial institutions involved in cross-border transactions.

LEI codes should not be confused with company or organization IDs. This code is a type of Global Trade Item Number (GTIN) used to identify an organization or entity, similar to how a GTIN is used to identify products. An LEI code is used with a street address, telephone number, and other identifying information for locating the entity and obtaining further information about it. An LEI checker is a tool that displays an entity's LEI code and information in an organized manner.

Conclusion

An LEI code is an identifier that can help identify legal entities engaged in cross-border trade and investment. It may also help improve transparency in international trade by providing a unique code for legal entities involved in cross-border transactions.

LEI code is the number or alphanumeric code assigned by the ISO to identify a company or organization for international trade, especially for companies involved in global commerce. The London-based organization Legal Entity Identifier Regulatory Oversight Committee (TEROC) runs the most popular LEI registry, which maintains more than 86 million codes worldwide.

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