LEI Code and KYB: Why Reliable Company Identification Matters
In business, it is no longer always enough to know a company’s name, registration number, and website. In international trade, financial services, supply chains, and regulated industries, it is increasingly important to understand who you are actually doing business with.
This is where KYB, or Know Your Business, becomes important. KYB is the process of verifying a company’s identity, legal status, ownership structure, and potential risks before or during a business relationship.
An LEI code helps make this process clearer, faster, and more reliable.
What is KYB?
KYB stands for Know Your Business. It is a process used to verify the identity and background of a company. The aim is to confirm whether a business partner, client, or supplier really exists, who controls it, and whether there are legal, financial, or compliance risks connected to it.
KYB is related to KYC, or Know Your Customer. The difference is that KYC often focuses on customer due diligence more broadly, including individuals, while KYB focuses specifically on legal entities such as companies.
A KYB process usually includes checking:
the company’s official name and registration details;
registered address and legal status;
ultimate beneficial owners, or UBOs;
parent companies and ownership structure;
sanctions, PEP lists, and adverse media;
changes in company data over time.
Why is company identification difficult?
Verifying a company may sound simple, but in practice it can be complex. Every country has its own business register, data format, language, and validation rules.
The same company name can appear differently across different systems. Some countries provide easily accessible business data, while others have more limited or less structured information. If a company has a multi-layered ownership structure across several jurisdictions, the process becomes even more difficult.
This creates a situation where manual checks can be slow, expensive, and prone to errors.
That is why companies and systems need a globally recognised identifier that can be used to identify a legal entity with confidence.
How does an LEI code support KYB?
An LEI, or Legal Entity Identifier, is a 20-character international identifier used to uniquely identify legal entities. It is connected to verified company reference data, such as the official name, registered address, and in some cases ownership relationships. The global LEI system is maintained by GLEIF, and LEI data is public, standardised, and machine-readable.
In a KYB process, this means that a company does not need to be identified only by its name or local registration number. The LEI code gives systems and organisations a clear reference to a specific legal entity.
This helps to:
reduce duplicate or incorrectly matched companies;
simplify international business partner verification;
make data processing easier to automate;
improve counterparty risk assessment;
speed up client or supplier onboarding.
LEI and beneficial ownership checks
One of the most important parts of KYB is identifying ultimate beneficial owners, or UBOs. A company may be owned by another company, which may in turn be owned by another legal entity, often across multiple countries.
The LEI system also includes so-called Level 2 data, which can provide information about direct and ultimate parent entities. This helps organisations better understand the group structure behind a company.
This does not always replace a full UBO investigation, but it gives the KYB process a stronger and more structured foundation.
Why is a valid LEI important?
An LEI code is not just a one-time identifier. The data connected to an LEI must be kept up to date.
If an LEI is expired, it means the company’s data has not been recently confirmed. From a KYB perspective, this can be a risk signal because the company’s ownership, address, or legal status may have changed.
A valid LEI shows that the company’s data has been recently reviewed and updated. If the LEI is expired, a business partner, bank, investment platform, or other service provider may require it to be renewed before continuing with certain transactions.
LEI in automated and AI-based systems
More KYB and risk management processes are becoming automated. Systems that verify companies need to compare, connect, and update data quickly.
AI and automation work best when the input data is clear and unambiguous. A company name is not always a reliable identifier, because several companies may have identical or very similar names. An LEI code gives the system a specific and internationally recognised identifier.
This makes LEI especially useful when companies need to be checked at scale — for example in financial institutions, payment services, supply chains, platforms, and international business.
Who needs KYB and LEI?
KYB is especially important in industries where business partner verification and risk assessment are part of regulatory requirements. These include:
banks and financial institutions;
investment firms;
payment service providers;
insurance companies;
crypto and fintech businesses;
companies with large supplier networks;
businesses involved in cross-border trade;
platforms where companies transact with each other.
However, LEI is not useful only for heavily regulated sectors. For an ordinary company, a valid LEI can also create an advantage by making the company easier to identify and verify internationally.
Conclusion
The purpose of KYB is to make sure a company knows who it is doing business with. It helps reduce risk, prevent fraud, and meet regulatory requirements.
An LEI code supports this process by giving a company a globally recognised and verified identifier. A valid LEI helps identify a company more clearly, supports business partner verification, and reduces friction when dealing with banks, financial institutions, and other service providers.
If your company does not yet have an LEI code, or if your existing LEI has expired, it is worth registering or renewing it before it becomes urgent.
With LEI Partner, you can register, renew, or transfer your LEI code quickly and easily.