The Legal Entity Identifier (LEI): trust and transparency in a digitalised economy

18 desember 2024

With the global economy’s increasing digitalisation, security in business relationships is becoming increasingly important. The Legal Entity Identifier (LEI), a globally standardised identifier for companies, plays a key role in creating trust and transparency in international trade. But why is the LEI so important, and how can it help companies protect themselves in an increasingly digitalised world?

The emergence of the Legal Entity Identifier (LEI)

The global financial crisis of 2008 revealed many challenges, including the inability to uniquely identify parties to financial transactions. Regulators worldwide recognised the need for a standardised system to better assess and combat systemic risk. The solution was the Legal Entity Identifier (LEI)—a unique, ISO-standardised code assigned to each legal entity involved in financial transactions.

Today, the LEI is an indispensable tool that creates trust in business relationships and makes illegal activities such as money laundering and terrorist financing more difficult.

How the LEI helps companies

The LEI number offers many advantages, especially for companies that operate across borders:

unique identification

The LEI allows for the verification of a company’s identity worldwide, including its ownership and control structures. This creates clarity and prevents misunderstandings or fraud.

promoting trust and transparency

At a time when identity fraud is rapidly increasing, the LEI is a trusted source for validating business partners worldwide.

support for regulatory compliance

In many countries, the Legal Entity Identifier is mandatory for certain financial transactions. Companies that have an LEI number fulfil regulatory requirements efficiently and effortlessly.

LEI as protection against financial crime

Digitalisation also has its downsides. According to the NASDAQ Global Financial Crime Report 2024, more than USD 3.1 trillion in illicit funds flowed through the global financial system in 2023. The LEI number helps to increase the transparency of financial transactions and combat illegal activities such as money laundering, human trafficking and terrorist financing.

The verifiable LEI (vLEI): Trust in a digital era

In 2022, the Global Legal Entity Identifier Foundation (GLEIF) introduced the verifiable LEI (vLEI). This new digital tool enables companies to link their LEI number directly to transactions and digitally verify the identity of authorised representatives. Using tamper-proof cryptography, the vLEI offers an innovative solution to prevent identity fraud and promote trust in digital business relationships.

Why now is the right time to apply for an LEI number

The increasing networking and digitalisation of the economy makes the Legal Entity Identifier indispensable. Having an LEI number enables companies to position themselves as trustworthy partners, tap into global markets and minimise risks.

Registering an LEI number is simple and is done via authorised LEI issuers. After verification of company data, the LEI is assigned and must be renewed annually to remain current.

Conclusion

The Legal Entity Identifier (LEI) is a decisive step towards a more secure and transparent economy. Companies that rely on the LEI benefit from increased efficiency, regulatory compliance and greater trust in their business relationships.

Seize the opportunity to strengthen your identity globally. Contact us today to register your LEI number and become part of a trusted global economy!