Many people have heard of TD Bank Group’s attempted acquisition of First Horizon, and the subsequent collapse of that deal. With recent turmoil in the banking system, one might assume that the collapse of the deal had something to do with those developments. It would seem to not be the case at all. While it may be too early or simplistic to place blame on just one thing, I do think there’s a lesson to be learned.
A recent Bloomberg article, points out that a significant part of the collapse may be directly tied with legacy Anti-Money Laundering (AML) systems. TD has a comprehensive AML system for handling all kinds of AML regulatory requirements, including doing reports called Suspicious Activity Reports (SAR’s). These SAR’s and the rules that trigger them, have been developed over decades using very complicated SAS based technologies.
This is not the first time SAS’ AML systems in Canada have been in the spotlight either. BC Lottery Corporation’s failure to address their Money Laundering problem has been in the media more times than one can count. They pinned their hopes on using a very expensive legacy SAS solution to help them address their needs, only it didn’t work at all, forcing them to use Excel for many requirements instead. One BCLC employee I talked to described SAS’ AML Solution as a “square peg in a round hole”.
Having personally sold these AML systems years ago, I know a thing or two about the systems and the businesses that use them. The name of the game with AML is, and has always been to do the absolute bare minimum that regulators are willing to accept, nothing more. Despite leaders like Capital One showcasing how much more effective they can be at combating Fraud and Money Laundering with modern technologies, regulators have still been willing to accept reports generated by 1960’s based technologies. But the tide may be finally turning.
While it would be wrong to fault any one vendor or team, the reality is that using legacy analytics presents enormous and unquantifiable risks. An therein lies the problem, nobody within the organization owns that risk. Nobody has ever been directly fired for keeping the status quo, but lots have been for failing in a modernization initiative. Notionally it’s a CIO’s job, but due to accumulated technical debt, most are just too busy keeping the lights on. It takes a bold and visionary CIO, like TransUnion’s Alejandro Reskala, to tackle such challenges head on. Perhaps what’s needed is a Chief Modernization Officer, who’s explicit job it is, to continually address the technical debt within an organization.
Developing and executing workflows in a legacy analytics is 100 times slower and far more complex. It also requires increasingly scarce resources to maintain. That is a really big risk to an organization and the industry as a whole. As far as I can tell, this is the first time such a high profile impact has been directly linked to legacy analytics. Shareholders might finally start pricing in risks from organizations that have an over-reliance on legacy technologies, without a realistic modernization plan. Every organization incurs some amount of technical debt, it’s only natural. But that debt isn’t visible on the balance sheet, and it really should be.
Find out more about analytics modernization – firstname.lastname@example.org
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