Legal entities that need to make financial transactions can be difficult to identify. This can cause problems when dealing with banks, as they need to verify the identity of each business.
An LEI code can solve this problem by allowing banks to quickly confirm a business’s legitimacy. However, there are some things that you need to know before applying for an LEI code.
Choose Your Issuer Carefully
As a business owner, you know that getting an LEI (Legal Entity Identifier) can be a complicated process. It’s a new way for businesses to identify themselves in the global financial system and it was introduced as a response to the 2008 market crash. An LEI is like a business passport and it’s the only universally recognized code that can confirm whether a company is who they say they are. It can also speed up processes by replacing time-consuming background checks in KYC (Know Your Customer) systems.
The LEI can be used for all kinds of transactions, but the most important thing to remember is that it’s not mandatory to have one. Nevertheless, the LEI is becoming increasingly more common as many regulators require it for all companies that participate in their financial markets and it can help with compliance.
In order to get an LEI, you have to go through a service provider that is accredited by the GLEIF (Global Legal Entity Identifier Foundation). These companies are called Local Operating Units and they delegate their responsibilities for issuing the codes to other members of the GLEIF network. So, when choosing a company to handle your application, make sure that it is accredited and that they have a good reputation in the industry.
The first step is to create an account with your chosen LOU and fill in the basic company details. You’ll also need to upload some documentation, such as a Certificate of Incumbency or Register of Directors. This information is cross-matched with the data on local registry records to determine if the company exists.
If there are discrepancies, the LOU will contact the company directly to resolve them. This usually takes place within 30 days. Once the verification is complete, you’ll receive a confirmation email and an automatic renewal reminder. The LEI can be renewed for the same price that you paid to initially get it.
Having an LEI is a great way to boost your company’s credibility in the international market. It will increase your transparency and give you an edge over competitors. Moreover, you can display your LEI on your website and use it in QR codes and bar codes to enhance your brand visibility.
Be Prepared for the Verification Process
As a small business or startup, it’s incredibly important to have all the paperwork in order. This is a huge part of what makes lenders and banks trust you. If a bank cannot confirm your identity, they will not disburse funds. However, if you have an LEI code, they can look it up and know that you are indeed the entity that owns the business. This allows you to apply for loans more easily and quickly, as it will save them the time of checking multiple files and directories. You can read more on vlei.com to learn better and improve your understanding of LEI.
A LEI is a 20-digit code created by the Global Legal Entity Identifier Foundation (GLEIF) to help primarily financial services companies meet their Know Your Customer (KYC) requirements. It allows them to confirm the ownership and existence of a legal entity across borders. It also helps them avoid the need to verify every piece of information in their counterparty’s corporate structure each time they transact.
Unfortunately, it is still common for businesses to be denied loans because of the lack of necessary documentation. This is especially true in cross-border transactions. Having an LEI is the only way to circumvent this roadblock, as it will prove that you are legitimate and not trying to defraud the lender.
To get an LEI, you must be prepared for a verification process that can take anywhere from minutes to a day. It starts with a registration process where you will provide your LEI Application Form and other relevant details. You will also be required to upload the documentation you have on file as proof that your business is legitimate. This can include documents like company registration certificates, taxation IDs, shareholders’ agreements and other official records.
If your documents pass the first validation checks, then you will be able to proceed to a second check that verifies the information in your application. This will include a check of the registration address as well as the headquarters address. Each legal entity has different documents it will need to submit based on its jurisdiction and entoty type.
A good LEI issuer should be able to give you an idea of how long the registration and verification will take. They should be able to tell you how many steps are involved in the process and how much it will cost. They should also have a clear policy on resolving issues. It is also helpful to choose an issuer that offers tools like predictive technology and a built in API to embed the LEI application process into your business. This will make the entire process smoother for you and your customers.
Be Patient
Getting an LEI Code is an important step for any business, and it can help you improve your business’s reputation in the financial world and make it easier to do business around the globe. However, it is important to remember that the LEI application process is not instantaneous.
One of the reasons why is that banks, money lenders and credit unions want to see a lot of documentation before they will approve a loan for a small business or startup. This is because they are trying to minimize their risk as much as possible.
If you are applying for an LEI code for a new company, you should be prepared to wait a few days before it is approved. This is because the information you submit must be verified by the Global Legal Entity Identifier Foundation (GLEIF) before it can be issued. Once the GLEIF has confirmed that the information is correct, your LEI code will be available in the public database within 24 hours. Bank databases are connected to the GLEIF, so your new LEI will be visible in those databases as well.
In addition, the type of entity you are applying for an LEI code for can also affect how long it takes to get it. For example, a limited company is easy to validate by checking the company registration documents in the country where the company was founded. A Fund, Trust or Pension Scheme has a more complex structure and will need to provide additional documentation like a prospectus or originating document before an LEI can be issued.
It is essential to choose an LEI issuer that has systems in place to handle urgent requests for LEI codes. The bottom line is that while it may take a little time to get an LEI code, the benefits far outweigh the inconvenience. The financial world has adopted the LEI as a standard way of identifying entities and businesses, helping companies comply with regulations, facilitate transactions and more.
