LEI as an investigation tool
LEI stands for Legal Entity Identifier, which is a unique identifier assigned to legal entities that engage in financial transactions. It is typically used to identify parties involved in financial transactions, such as corporations, banks, and other financial institutions.
While LEI codes are primarily used in financial transactions, it is possible that law enforcement or government agencies may use them in the course of investigating criminal activity related to financial transactions. For example, LEI codes may be used to track the flow of funds in money laundering or fraud schemes.
However, it’s important to note that LEI codes alone would not be enough to prove criminal activity. They would likely be just one piece of evidence used in conjunction with other investigative tools and techniques.
Overall, LEI are primarily used for financial purposes and are not directly related to criminal investigations. However, they could be used as a tool in investigating financial crimes.
Known frauds and scandals
Danske Bank Scandal
A significant money laundering scam involving the Danish bank Danske Bank, involved $230 billion in suspicious transactions passing through its Estonian office between 2007 and 2015. The scandal involves the transferring of funds from nations like Russia, Azerbaijan, and Moldova into the financial system of the EU, using shell corporations and other entities.
In order to help identify the businesses engaged in the money laundering scheme, LEI codes were used as part of the Danske Bank scandal inquiry. Legal entities involved in financial transactions are given unique identifiers called LEI codes, which can be used to monitor the transfer of money between various businesses and accounts.
To follow the flow of money between the many firms, investigators used LEI codes. Investigators discovered a network of shell companies and other organizations that were employed to transfer funds between various accounts and jurisdictions. Investigators were able to compile evidence against Danske Bank and some of its clients by examining the flow of money and the relationships between various companies.
The use of LEI codes in the Danske Bank scandal highlights the importance of transparency and accountability in financial transactions. LEI codes are meant to provide a clear and consistent way of identifying legal entities engaged in financial transactions, and they can be a powerful tool in preventing and detecting financial crimes like money laundering. However, their effectiveness depends on the accuracy and reliability of the data that is associated with them, as well as the willingness of regulators and investigators to use them to their fullest potential.
Wirecard, a German payments company, was involved in a massive fraud scheme that involved inflating its revenue and profits. As part of the scheme, Wirecard created fake transactions and fake clients to make its financial performance look better than it actually was.
To help conceal the fraud, Wirecard also created fake LEI codes for some of its subsidiaries. LEI codes are meant to uniquely identify legal entities engaged in financial transactions, but Wirecard’s fake LEI codes made it look like its subsidiaries were legitimate entities engaged in real financial transactions.
The fake LEI codes were discovered by regulators and investigators who were looking into Wirecard’s financial statements. The discovery of the fake LEI codes was a red flag that something was amiss at Wirecard, as it suggested that the company was trying to deceive regulators and investors.
The use of fake LEI codes in the Wirecard fraud highlights the importance of accurate and reliable financial data in preventing and detecting financial crimes. LEI codes are meant to provide transparency and accountability in financial transactions, but they can be undermined by fraudulent actors who seek to conceal their activities. As such, it’s important for regulators and investigators to be vigilant in detecting and investigating any suspicious activity related to LEI codes or other financial data.
LEI codes have also been used in investigations into cryptocurrency-related crimes. For example, LEI codes can help identify the owners of cryptocurrency exchanges and other businesses involved in cryptocurrency transactions.
Overall, LEI codes can be a useful tool in investigations into financial crimes, as they can help identify the parties involved in financial transactions and track the movement of funds. However, as with any investigative tool, LEI codes must be used in conjunction with other evidence to build a case.