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Best practices for KYC/AML

2021-04-16
2 min read

Verifying LEI for Mandatory KYC Compliance

Manual legal entity identification in KYC gravely affects the onboarding time making onboarding a significant burden for clients instead of a quick and engaging formality. Because of the poor and time-consuming service employees have less time to work on acquiring new and facilitating existing clients.

LEI regulations 

LEI (Legal Entity Indicator) is a code reference that enables to accurately identify all legal entity types (corporations, individuals, funds, etc.) taking part in financial transactions. Every legal entity identifier number connects to a legal entity ownership structure. It is globally accessible and therefore enhances transparency in the marketplace, delivering reports to the regulatory authorities on any out-of-place transactions.

Global market participants and investment companies are being required to obtain a Legal Entity Identifier from their customers or business partners before conducting any transactions.

According to The Markets in Financial Directive (MiFID II or MiFIR) regulation transaction parties can not trade with investment firms if they haven’t been assigned a legal entity identifier number.

Having an LEI helps:

  • Reduce the risks of soon-to-happen financial transactions and determine the risk of a particular trading partner;
  • Downshift the report and information gathering cost that comes with financial transactions;
  • Enhance market transparency. Sharing of international financial transactions allows detecting financial fraud.

How to verify LEI 

To confirm that company is a legitimate party for a transaction, its legal entity identifier number check can be performed in two basic ways: manually or automatically. Although, the time that each of these verification methods requires varies greatly (a couple of days by human vs a couple of minutes by a machine), the essential algorithm stays the same:

  1. Companies compose a list of entities of interest;
  2. The records are matched against the verified entity database;
  3. The reports are issued back to businesses containing statuses of each LEI submitted.


1000+ companies and 10 000 000 users trust Sumsub and benefit from the business verification. Learn more about our approach here.

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