CoDetect: Financial Fraud Detection With Anomaly Feature Detection

Dongxu Huang, Dejun Mu, Libin Yang, Xiaoyan Cai

IEEE Access · 2018 · 139 citations · 40 references

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Concepts

TL;DR

Financial fraud, such as money laundering, involves complex trade and financial networks that make detection difficult, but both network interactions and entity features can be extracted and used for anomaly detection, offering complementary information that existing methods often ignore. The authors introduce CoDetect, a novel framework that jointly exploits network structure and entity features to detect financial fraud. CoDetect simultaneously identifies fraudulent activities and the associated feature patterns within the transaction network. Experiments on synthetic and real-world datasets demonstrate that CoDetect is both efficient and effective, particularly in combating money laundering.

Abstract

Financial fraud, such as money laundering, is known to be a serious process of crime that makes illegitimately obtained funds go to terrorism or other criminal activity. This kind of illegal activities involve complex networks of trade and financial transactions, which makes it difficult to detect the fraud entities and discover the features of fraud. Fortunately, trading/transaction network and features of entities in the network can be constructed from the complex networks of the trade and financial transactions. The trading/transaction network reveals the interaction between entities, and thus anomaly detection on trading networks can reveal the entities involved in the fraud activity; while features of entities are the description of entities, and anomaly detection on features can reflect details of the fraud activities. Thus, network and features provide complementary information for fraud detection, which has potential to improve fraud detection performance. However, the majority of existing methods focus on networks or features information separately, which does not utilize both information. In this paper, we propose a novel fraud detection framework, CoDetect, which can leverage both network information and feature information for financial fraud detection. In addition, the CoDetect can simultaneously detecting financial fraud activities and the feature patterns associated with the fraud activities. Extensive experiments on both synthetic data and real-world data demonstrate the efficiency and the effectiveness of the proposed framework in combating financial fraud, especially for money laundering.

References

40