Benefits of Using LEI System
The Legal Entity Identifier (LEI) is a global reference number that uniquely identifies every legal entity or structure that is a party to a financial transaction, in any jurisdiction. It is a 20-digit unique code to identify parties to transactions worldwide. It provides basic information like name, address, and the type of entity. It is used to locate entities on the global database and make it easier to conduct global business. It has become a legal requirement for many companies in global trade. LEI number prices paid by a business provide them a good value on this expense as having an LEI number can boost the growth of the business.
The key benefits of the LEI system correspond to the fundamental attributes of the system:
- Uniqueness and Singularity
The LEI system architecture assumes that only one legal entity identifier can be assigned to a legal entity. It also assumes that LEIs cannot be reused.
The LEI system is immune to any changes that occur in the lifetime of an entity. Even if a given entity is dissolved through closure or merger, or completely subsumed by another entity, its original identifier shall remain operational, thereby allowing the retrieval of reference data corresponding to the time of the entity’s activity. The LEI system shall also be technically persistent and resilient. We discuss this attribute further in the chapter “Blockchain for LEI system”.
The LEI identifiers are 100% neutral – at their core, they form a single data field and hold no embedded intelligence, meaning that an identifier value cannot be used to compromise its neutrality.
The LEI system is supported by a trusted method of verifying the identity of the legal entity in question. This is guaranteed by the issuer’s (LOUs) maintenance of all respective reference and identification data. Moreover, this data is sufficient for verifying the authenticity of an entity’s revealed identification. The system’s reliability is also supported by clear-cut, high-quality assurance criteria guaranteed by the issuers. We extend our discussion of this attribute in the chapter “Blockchain for the LEI system”.
- Openness and public availability
The LEI system is built as a completely open, non-proprietary public good. Unlike systems such as the DUNS, its fundamental data for all registered entities is available free of charge. The data that forms the core of the LEI system is available completely for free.
The LEI system is destined to become the global standard for the unique identification of legal entities across the global financial sector and beyond. To achieve this goal, it must remain open to potential future extensions related to both new forms of legal entities, as well as the elements of the reference data concerning those entities. Our system has already prepared for this and as such already allows for possible extensions, made possible through the use of semantic technologies.
The benefits of having an LEI System whereby all market participants are listed on a single database are plentiful. The LEI is now being rolled out with already 1.6 million LEIs and they are having a profound effect in multiple business use cases. The best thing about the LEI system is that anybody can get one.