Referring to the approval of the Group of Twenty (G20) countries - of which KSA is a member - of the Legal Entity Identifier (LEI) system in July 2012 G, in order to enable regulatory and supervisory authorities to assess potential risks, maintain financial stability, and monitor dealers in the financial markets, and provide accurate and periodically updated financial information. This system aims to provide new mechanisms through which financial sector institutions can systematically and effectively identify risks, and provide operational regulatory requirements to ensure the stability and efficiency of the financial sector. Global legislative bodies have concluded the importance of providing special identifiers for every business entity around the world and exchanging them transparently. In the first half of this year, SAMA hosted committees and work teams of the Global LEI system, and held a workshop to explain the project in the presence of representatives of banks, insurance and reinsurance companies, and financing companies.

The LEI system is an approved international system that includes a global standard numbering (ISO 17442) for legal entities (companies and institutions), so that each legal entity is identified with a special code consisting of 20 characters. Through this identifier, basic information about the entity appears, such as the official name, address of the headquarters, the legal form of the entity, and the relationships of subsidiaries with the parent company.

To operate the project, the Central Registration Unit (GLEIF) adopted international standards for the LEI system and qualified and certified the local operating units (LOU) for the project according to approved and unified technical and legal requirements. Most supervisory and regulatory authorities around the world have realized the urgent need to approve the LEI system. There are also thirty-two accredited local operating units linked to the Global Legal Entity Identifier Foundation (GLEIF), including an accredited Saudi unit affiliated with the Saudi Credit Bureau (SIMAH) under the name of the (Identifier) unit.

Accordingly, banks, insurance and reinsurance companies, and financing companies operating in KSA (and their subsidiaries) are required to obtain an LEI from one of the local operating units approved by GLEIF as of 01/08/2018 G, provide SAMA with this LEI, and circulate to their financial group the importance of registration for international purposes.

      Pursuant to Circular No. (19636/67) dated 23/03/1441 H, and given the importance of the LEI contributing to maintaining financial stability, assessing risks, and monitoring customers in the financial sector, SAMA emphasizes the following:

1. All financial institutions subject to SAMA supervision, along with the affiliates of these institutions, shall obtain a Legal Entity Identifier (LEI) from an operating unit approved by GLEIF.
2. Branches of foreign financial institutions operating in Saudi Arabia and subject to the supervision of SAMA shall obtain an identifier independent of the main office.

Pursuant to Circular No. (43029603) dated 04/04/1443 H, and in an effort by SAMA to support the establishment of a unified system that serves the Kingdom in applying best practices for risk management and financial stability and enhancing transparency in financial markets in line with the objectives of the Kingdom’s Vision 2030, and in a way that contributes to implementing the Kingdom’s international obligations arising from its membership in the G20, and strengthening the Kingdom’s international standing, and to facilitate the implementation of Legal Entity Identifier (LEI) issuance and renewal services, to enable financial sector institutions to identify and evaluate potential risks in a systematic and effective manner that contributes to the stability and efficiency of the financial sector. Accordingly, the following was resolved:

1. The Legal Entity Identifier shall be valid and up-to-date for financial institutions subject to the supervision of SAMA, establishments affiliated with financial institutions, and branches of foreign financial institutions operating in KSA, referred to in SAMA Circular No. (19636/67) dated 23/03/1441 H.
2. Financial institutions shall be allowed to sign an agreement of issuing, updating and renewing LEI through a financial institution” (Marafiq) with the Saudi Credit Bureau (SIMAH) as the authorized local operator of LEI (local operating unit) to enable financial institutions themselves to issue, update and renew LEI on behalf of business sector clients (current and/or potential) pursuant to the provisions of the agreement approved by SAMA.

SAMA urges financial institutions - as the case may be - that policies and procedures should include a legal entity identifier for all business sector customers before granting credit, that the identifier be valid and updated throughout the existence of the relationship, and that obtaining it should be a supportive tool for identifying the customer and the risks associated with his transactions.