Identity crisis? LEIs and their role in promoting clarity and compliance

The first step in any transaction or compliance process is to identify the entity that is your counterparty. Relying on entity names alone is too ambiguous, particularly when you consider the variables that are generated by similar names, transliterations and simple human error. Similarly, while most company registries have a unique company registration number, each follows a different format – sometimes depending on the exact location and legal form of the entity – which makes deciphering these identifiers a challenge in itself. In the aftermath of the global financial crash, amidst an increasingly complex and globalised economy, it was widely recognised that the international financial system was in need of stricter controls and transparency.

First introduced in 2012, the global Legal Entity Identifier (LEI) was the initiative of the G20 and the Financial Stability Board (FSB). The 20-character, alpha-numeric code is a unique identifier for legal entities involved in global financial transactions and contains information about the entity’s registration, governance and ownership structure. The Global LEI Foundation, the not-for-profit body responsible for issuing the identifiers, aims over time to build a global directory of all entities looking to trade internationally, and even to use it as a passport to other services such as opening a bank account or owning a website domain name.

Global adoption of the LEI system has been uneven – largely due to differences in regulatory requirements. At the end of 2019, the total LEI population was around 1.5 million, the majority of which have been assigned to legal entities based in the US and Europe. The number is growing considerably elsewhere too, notably in China, India, Australia and South Africa and we are also seeing more LEIs being issued to organisations based in the Middle East and Africa.

In support of our efforts to bring greater clarity to the economies we serve, Diligencia has added LEIs to all of the entities in our region that have been assigned them so far. We hope that the addition of these identifiers will make it even easier to find comprehensive company information, accessible in one place, without the inconvenience of searching multiple sources.