Table of contents
- The importance of KYC in the regulatory framework
- What is an LEI code and what data does it contain?
- Advantages of the LEI in Due Diligence processes
- Regulatory obligations and corporate integration
The importance of KYC in the regulatory framework
In the current regulatory framework, the concept of KYC (Know Your Customer) is becoming increasingly important in the management of commercial and financial relationships.
Accurately identifying customers, understanding the nature of their activities and verifying the reliability of counterparties have become essential requirements for operating in a compliant and risk-aware manner.
This requirement now concerns a wide range of entities: from banks and financial intermediaries to insurance companies, fintechs, professionals and operators in regulated sectors.
KYC concretely contributes to promoting transparency, traceability and fairness in economic relations, reducing the risk of involvement in opaque or non-compliant transactions.
The evolution of European regulations has prompted organisations to adopt structured processes for customer risk assessment and continuous monitoring.
In this scenario, standardised tools such as the LEI (Legal Entity Identifier) code represent tangible support for making due diligence more efficient and reliable.
What is an LEI code?
The LEI code is an alphanumeric code, consisting of 20 characters, introduced internationally in 2012 on the initiative of the G20 and coordinated by the Financial Stability Board (FSB).
The GLEIF (Global Legal Entity Identifier Foundation) is responsible for managing LEI codes and oversees their issuance through a network of accredited Local Operating Units (LOUs).
Each LEI contains essential, publicly accessible data on the registered entity:
- Legal name of the entity.
- Registered office and country of registration.
- Registration number in the companies register.
- Information on any controlling or controlled entities (corporate structure).
The importance of the LEI in KYC processes
The LEI code offers several advantages in the KYC process, proving to be an effective tool for verification and monitoring activities:
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Unique and global identification
The LEI enables the clear identification of counterparties, overcoming difficulties associated with homonyms, linguistic variations and differences between national legal systems. -
Transparent verification of information
Thanks to the public availability of LEI data, institutions can easily compare the information declared by the customer with officially registered data, improving the reliability of the onboarding process. -
Analysis of corporate structures
The LEI allows for a better understanding of the composition and control relationships between legal entities, which is crucial for assessing indirect risks or complex corporate links. -
Operational efficiency
The integration of the LEI code into KYC systems automates part of the verification process and reduces the need for redundant documentation, improving internal efficiency and the customer experience.
Regulatory obligations related to the LEI
In Europe and other jurisdictions, the use of the LEI code is already mandatory in several regulated contexts:
- EMIR: for counterparties involved in derivative contracts.
- MiFID II / MiFIR: for all legal entities carrying out transactions in financial instruments.
- SFTR: for entities involved in securities financing transactions.
The integration of the LEI code into business processes and KYC checks is becoming an increasingly strategic choice for organisations operating in the financial sector.
Thanks to its ability to provide a unique and globally verifiable identification, the LEI promotes transparency and improves the overall quality of the information managed.
