In this day and age, keeping up with developments in digital transformation is necessary for the survival of any financial institution. The negative consequences of falling behind are simply too great, as they can tarnish any company’s reputation or result in enormous fines and sanctions. In fact, a single data breach can cost a company an average of over USD 8 million, or around USD 242 per breached record. As such, any business worth its salt knows that settling for outdated legacy systems is simply unacceptable.
That being said, there are understandable reasons why some banks, insurance companies, and other types of financial institutions are hesitant to let go of their existing technology. Some truly believe that their current systems are still robust enough to face any threats that may come their way. Others may be discouraged by the thought of having to learn an entirely new system or build one from the ground up.
Regardless of the reasons for their hesitation, it is in their best interest to change to a more comprehensive software solution sooner rather than later. Such a system should come with advanced analytics, enterprise-grade AML case management, and intuitive investigation tools, among many other crucial features. Unfortunately, many of these capabilities cannot be found in outdated legacy systems, and holding onto one can put your financial institution at great risk. Here’s why:
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In the past, your company’s legacy system may have been up to date with then-current cybersecurity practices. But as security technologies evolve, so, too, do the strategies used by financial criminals. Because of this, data breaches are not a question of “if” but “when.” To make matters worse, outdated legacy systems may be incompatible with modern features such as cloud-based management and secure file encryption.
As such, financial institutions cannot assume that an anti-AML software solution is a one-and-done purchase. Rather, this software must be constantly updated based on the latest compliance standards and trends in security technology. This will ensure that your company is not lagging behind malicious agents.
In a perfect world, no piece of software would ever go obsolete. However, many old legacy systems no longer receive updates from the companies that made them. To make matters worse, those same companies often stop providing customer support for outdated products, as it is more profitable for them to swiftly address any issues with their latest offerings instead.
Because of this, any weaknesses left unpatched can be exploited by financial criminals to gain backdoor access to a company’s databases and applications. Should these vulnerabilities eventually be identified, fixing them may not be so straightforward due to the inflexible nature of many outdated legacy systems.
For all of the features that legacy systems brought to the table back when they first launched, they now pale in comparison to what modern software solutions have to offer. While older systems can simplify certain workflows, they still require more manual input compared to their modern counterparts. Additionally, legacy systems are more prone to flagging false positives or negatives, requiring more manual reviews from your compliance officers. All this can demoralize even the most diligent of employees, and can even result in burnout or—worse—human error.
On the other hand, many modern software solutions now come with built-in automation and customization features. With these, your team won’t have to spend as much time on tedious and repetitive work. Instead, they can focus on more important tasks that will have a greater impact on your business’s bottom line.
When it comes to assessing financial software solutions, many companies mistakenly believe that they will save more in the long run by simply sticking with their existing system. Often, they focus only on the monetary costs of buying a new system upfront as well as the costs of future updates. What they may fail to account for, however, are the labor costs associated with operating and maintaining their chosen system.
Because of the inefficiencies that are inherent in outdated legacy systems, compliance teams must work harder to ensure that their output is compliant with the latest anti-money laundering and financial crime standards. Instead of optimizing your business’s workflow, your staff will be forced to make up for the weaknesses of dated software, slowing them down and directly impacting your institution’s overall profitability.
While holding on to an outdated legacy system may appear to be the more practical choice at first glance, it may be doing your business more harm than good. There will come a point when maintaining such a system stops being financially feasible, especially when there are plenty of more modern software solutions out on the market today. Rather than continuing to use an old system that has outlived its usefulness, it’s best to switch to a more robust software solution. You may even end up saving your bank’s bottom line as a result.
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