A major challenge when trying to detect fraud is that the fraudulent activities form a minority class which make up a very small proportion of the data set. In most data sets, fraud occurs in typically less than 0.5% of the cases. Detecting fraud in such a highly imbalanced data set typically leads to predictions that favor the majority group, causing fraud to remain undetected. We discuss some popular oversampling techniques that solve the problem of imbalanced data by creating synthetic samples that mimic the minority class. A frequent problem when analyzing real data is the presence of anomalies or outliers. When such atypical observations are present in the data, most oversampling techniques are prone to create synthetic samples that distort the detection algorithm and spoil the resulting analysis. A useful tool for anomaly detection is robust statistics, which aims to find the outliers by first fitting the majority of the data and then flagging data observations that deviate from it. In this paper, we present a robust version of ROSE, called robROSE, which combines several promising approaches to cope simultaneously with the problem of imbalanced data and the presence of outliers. The proposed method achieves to enhance the presence of the fraud cases while ignoring anomalies. The good performance of our new sampling technique is illustrated on simulated and real data sets and it is shown that robROSE can provide better insight in the structure of the data. The source code of the robROSE algorithm is made freely available.
Machine learning has automated much of financial fraud detection, notifying firms of, or even blocking, questionable transactions instantly. However, data imbalance starves traditionally trained models of the content necessary to detect fraud. This study examines three separate factors of credit card fraud detection via machine learning. First, it assesses the potential for different sampling methods, undersampling and Synthetic Minority Oversampling Technique (SMOTE), to improve algorithm performance in data-starved environments. Additionally, five industry-practical machine learning algorith…
With growing credit card transaction volumes, the fraud percentages are also rising, including overhead costs for institutions to combat and compensate victims. The use of machine learning into the financial sector permits more effective protection against fraud and other economic crime. Suitably trained machine learning classifiers help proactive fraud detection, improving stakeholder trust and robustness against illicit transactions. However, the design of machine learning based fraud detection algorithms has been challenging and slow due the massively unbalanced nature of fraud data and the…
Q-SYNTH: Hybrid Quantum-Classical Adversarial Augmentation for Imbalanced Fraud Detection
Quantum Physics and Spintronics Team, LPMC, Faculty of Sciences Ben M'sick（量子物理与自旋电子团队，拉瓦尔学院，本·马西克科学学院）；eBRAIN Lab, Division of Engineering, New York University Abu Dhabi (NYUAD)（eBRAIN实验室，工程学院，纽约大学阿布扎比分校（NYUAD））；Center for Quantum and Topological Systems (CQTS), NYUAD Research Institute（量子与拓扑系统中心（CQTS），NYUAD研究机构）
National Digital Switching System Engineering and Technological Research Center（国家数字交换系统工程技术研究中心）；University of Toronto（多伦多大学）；Fudan University（复旦大学）
With the rapid development of mobile networks, the people's social contacts have been considerably facilitated. However, the rise of mobile social network fraud upon those networks, has caused a great deal of distress, in case of depleting personal and social wealth, then potentially doing significant economic harm. To detect fraudulent users, call detail record (CDR) data, which portrays the social behavior of users in mobile networks, has been widely utilized. But the imbalance problem in the aforementioned data, which could severely hinder the effectiveness of fraud detectors based on graph…
This paper evaluates XGboost's performance given different dataset sizes and class distributions, from perfectly balanced to highly imbalanced. XGBoost has been selected for evaluation, as it stands out in several benchmarks due to its detection performance and speed. After introducing the problem of fraud detection, the paper reviews evaluation metrics for detection systems or binary classifiers, and illustrates with examples how different metrics work for balanced and imbalanced datasets. Then, it examines the principles of XGBoost. It proposes a pipeline for data preparation and compares a …
Imbalanced data classification problem has always been a popular topic in the field of machine learning research. In order to balance the samples between majority and minority class. Oversampling algorithm is used to synthesize new minority class samples, but it could bring in noise. Pointing to the noise problems, this paper proposed a denoising autoencoder neural network (DAE) algorithm which can not only oversample minority class sample through misclassification cost, but it can denoise and classify the sampled dataset. Through experiments, compared with the denoising autoencoder neural net…
Credit card fraud is an ongoing problem for almost all industries in the world, and it raises millions of dollars to the global economy each year. Therefore, there is a number of research either completed or proceeding in order to detect these kinds of frauds in the industry. These researches generally use rule-based or novel artificial intelligence approaches to find eligible solutions. The ultimate goal of this paper is to summarize state-of-the-art approaches to fraud detection using artificial intelligence and machine learning techniques. While summarizing, we will categorize the common pr…
Various problems of any credit card fraud detection based on machine learning come from the imbalanced aspect of transaction datasets. Indeed, the number of frauds compared to the number of regular transactions is tiny and has been shown to damage learning performances, e.g., at worst, the algorithm can learn to classify all the transactions as regular. Resampling methods and cost-sensitive approaches are known to be good candidates to leverage this issue of imbalanced datasets. This paper evaluates numerous state-of-the-art resampling methods on a large real-life online credit card payments d…
The insurance industry, with its large datasets, is a natural place to use big data solutions. However it must be stressed, that significant number of applications for machine learning in insurance industry, like fraud detection or claim prediction, deals with the problem of machine learning on an imbalanced data set. This is due to the fact that frauds or claims are rare events when compared with the entire population of drivers. The problem of imbalanced learning is often hard to overcome. Therefore, the main goal of this work is to present and apply various methods of dealing with an imbala…
Machine learning has opened up new tools for financial fraud detection. Using a sample of annotated transactions, a machine learning classification algorithm learns to detect frauds. With growing credit card transaction volumes and rising fraud percentages there is growing interest in finding appropriate machine learning classifiers for detection. However, fraud data sets are diverse and exhibit inconsistent characteristics. As a result, a model effective on a given data set is not guaranteed to perform on another. Further, the possibility of temporal drift in data patterns and characteristics…
Fraud detection is a challenging task due to the changing nature of fraud patterns over time and the limited availability of fraud examples to learn such sophisticated patterns. Thus, fraud detection with the aid of smart versions of machine learning (ML) tools is essential to assure safety. Fraud detection is a primary ML classification task; however, the optimum performance of the corresponding ML tool relies on the usage of the best hyperparameter values. Moreover, classification under imbalanced classes is quite challenging as it causes poor performance in minority classes, which most ML c…
In this paper, we propose a diversity-aware ensemble learning based algorithm, referred to as DAMVI, to deal with imbalanced binary classification tasks. Specifically, after learning base classifiers, the algorithm i) increases the weights of positive examples (minority class) which are "hard" to classify with uniformly weighted base classifiers; and ii) then learns weights over base classifiers by optimizing the PAC-Bayesian C-Bound that takes into account the accuracy and diversity between the classifiers. We show efficiency of the proposed approach with respect to state-of-art models on pre…
Université Libre de Bruxelles（布鲁塞尔自由大学）；Worldline（世界线）
Credit card fraud detection is a very challenging problem because of the specific nature of transaction data and the labeling process. The transaction data is peculiar because they are obtained in a streaming fashion, they are strongly imbalanced and prone to non-stationarity. The labeling is the outcome of an active learning process, as every day human investigators contact only a small number of cardholders (associated to the riskiest transactions) and obtain the class (fraud or genuine) of the related transactions. An adequate selection of the set of cardholders is therefore crucial for an …
This research explores Cost-Sensitive Learning (CSL) in the fraud detection domain to decrease the fraud class's incorrect predictions and increase its accuracy. Notably, we concentrate on shill bidding fraud that is challenging to detect because the behavior of shill and legitimate bidders are similar. We investigate CSL within the Semi-Supervised Classification (SSC) framework to address the scarcity of labeled fraud data. Our paper is the first attempt to integrate CSL with SSC for fraud detection. We adopt a meta-CSL approach to manage the costs of misclassification errors, while SSC algor…
Credit cards play an exploding role in modern economies. Its popularity and ubiquity have created a fertile ground for fraud, assisted by the cross boarder reach and instantaneous confirmation. While transactions are growing, the fraud percentages are also on the rise as well as the true cost of a dollar fraud. Volume of transactions, uniqueness of frauds and ingenuity of the fraudster are main challenges in detecting frauds. The advent of machine learning, artificial intelligence and big data has opened up new tools in the fight against frauds. Given past transactions, a machine learning algo…
Imbalanced datasets are ubiquitous. Classification performance on imbalanced datasets is generally poor for the minority class as the classifier cannot learn decision boundaries well. However, in sensitive applications like fraud detection, medical diagnosis, and spam identification, it is extremely important to classify the minority instances correctly. In this paper, we present a novel technique based on genetic algorithms, GenSample, for oversampling the minority class in imbalanced datasets. GenSample decides the rate of oversampling a minority example by taking into account the difficulty…
The UK anti-fraud charity Fraud Advisory Panel (FAP) in their review of 2016 estimates business costs of fraud at 144 billion, and its individual counterpart at 9.7 billion. Banking, insurance, manufacturing, and government are the most common industries affected by fraud activities. Designing an efficient fraud detection system could avoid losing the money; however, building this system is challenging due to many difficult problems, e.g.imbalanced data, computing costs, etc. Over the last three decades, there are various research relates to fraud detection but no agreement on what is the best…
National University of Singapore（新加坡国立大学）；University of Chicago（芝加哥大学）
Supervised learning from training data with imbalanced class sizes, a commonly encountered scenario in real applications such as anomaly/fraud detection, has long been considered a significant challenge in machine learning. Motivated by recent progress in curriculum and self-paced learning, we propose to adopt a semi-supervised learning paradigm by training a deep neural network, referred to as SelectNet, to selectively add unlabelled data together with their predicted labels to the training dataset. Unlike existing techniques designed to tackle the difficulty in dealing with class imbalanced …
Feedzai；Faculdade de Ciências da Universidade do Porto（波尔图大学理学院）；INESCTEC Universidade do Porto（波尔图大学系统与计算机工程、技术与科学研究所）
Evaluating new techniques on realistic datasets plays a crucial role in the development of ML research and its broader adoption by practitioners. In recent years, there has been a significant increase of publicly available unstructured data resources for computer vision and NLP tasks. However, tabular data -- which is prevalent in many high-stakes domains -- has been lagging behind. To bridge this gap, we present Bank Account Fraud (BAF), the first publicly available privacy-preserving, large-scale, realistic suite of tabular datasets. The suite was generated by applying state-of-the-art tabul…
Imbalanced class distribution is a common problem in a number of fields including medical diagnostics, fraud detection, and others. It causes bias in classification algorithms leading to poor performance on the minority class data. In this paper, we propose a novel method for balancing the class distribution in data through intelligent resampling of the minority class instances. The proposed method is based on generating new minority instances in the neighborhood of the existing minority points via a gamma distribution. Our method offers a natural and coherent approach to balancing the data. W…
For the highly imbalanced credit card fraud detection problem, most existing methods either use data augmentation methods or conventional machine learning models, while neural network-based anomaly detection approaches are lacking. Furthermore, few studies have employed AI interpretability tools to investigate the feature importance of transaction data, which is crucial for the black-box fraud detection module. Considering these two points together, we propose a novel anomaly detection framework for credit card fraud detection as well as a model-explaining module responsible for prediction exp…
This study uses stacked generalization, which is a two-step process of combining machine learning methods, called meta or super learners, for improving the performance of algorithms in step one (by minimizing the error rate of each individual algorithm to reduce its bias in the learning set) and then in step two inputting the results into the meta learner with its stacked blended output (demonstrating improved performance with the weakest algorithms learning better). The method is essentially an enhanced cross-validation strategy. Although the process uses great computational resources, the re…
Machine learning classifiers often stumble over imbalanced datasets where classes are not equally represented. This inherent bias towards the majority class may result in low accuracy in labeling minority class. Imbalanced learning is prevalent in many real-world applications, such as medical research, network intrusion detection, and fraud detection in credit card transactions, etc. A good number of research works have been reported to tackle this challenging problem. For example, Synthetic Minority Over-sampling TEchnique (SMOTE) and ADAptive SYNthetic sampling approach (ADASYN) use oversamp…
Medicare fraud results in considerable losses for governments and insurance companies and results in higher premiums from clients. Medicare fraud costs around 13 billion euros in Europe and between 21 billion and 71 billion US dollars per year in the United States. This study aims to use artificial neural network based classifiers to predict medicare fraud. The main difficulty using machine learning techniques in fraud detection or more generally anomaly detection is that the data sets are highly imbalanced. To detect medicare frauds, we propose a multiple inputs deep neural network based clas…
Imbalanced response variable distribution is a common occurrence in data science. In fields such as fraud detection, medical diagnostics, system intrusion detection and many others where abnormal behavior is rarely observed the data under study often features disproportionate target class distribution. One common way to combat class imbalance is through resampling the minority class to achieve a more balanced distribution. In this paper, we investigate the performance of the sampling method based on kernel density estimation (KDE). We believe that KDE offers a more natural way of generating ne…
INESC TEC（葡萄牙国家电气与计算机能源系统研发中心）；Universidade do Porto（波尔图大学）
Many real world data mining applications involve obtaining predictive models using data sets with strongly imbalanced distributions of the target variable. Frequently, the least common values of this target variable are associated with events that are highly relevant for end users (e.g. fraud detection, unusual returns on stock markets, anticipation of catastrophes, etc.). Moreover, the events may have different costs and benefits, which when associated with the rarity of some of them on the available training data creates serious problems to predictive modelling techniques. This paper present…
Laboratoire Hubert Curien UMR 5516（于贝尔·居里安实验室UMR 5516）；Univ Lyon（里昂大学）；UJM（圣艾蒂安大学）；Direction Générale des Finances Publiques（公共财政总局）；Ministère de l’Economie et des Finances（经济与财政部）
In this paper, we address the challenging problem of learning from imbalanced data using a Nearest-Neighbor (NN) algorithm. In this setting, the minority examples typically belong to the class of interest requiring the optimization of specific criteria, like the F-Measure. Based on simple geometrical ideas, we introduce an algorithm that reweights the distance between a query sample and any positive training example. This leads to a modification of the Voronoi regions and thus of the decision boundaries of the NN algorithm. We provide a theoretical justification about the weighting scheme need…
A Multi-Scale Graph Learning Framework with Temporal Consistency Constraints for Financial Fraud Detection in Transaction Networks under Non-Stationary Conditions
Graph-Based Fraud Detection with Dual-Path Graph Filtering
School of Intelligent Systems Science and Engineering（智能系统科学与工程学院）；Jinan University（暨南大学）；Zhuhai 519070, China（珠海519070, 中国）；Department of Computer Science（计算机科学系）；University of Illinois Chicago（伊利诺伊大学芝加哥分校）；Chicago 60607, USA（芝加哥60607, 美国）
Institute for Development and Research in Banking Technology（银行业技术发展与研究所）；Center for Development of Advanced Computing（高级计算发展中心）
Gaining the trust of customers and providing them empathy are very critical in the financial domain. Frequent occurrence of fraudulent activities affects these two factors. Hence, financial organizations and banks must take utmost care to mitigate them. Among them, ATM fraudulent transaction is a common problem faced by banks. There following are the critical challenges involved in fraud datasets: the dataset is highly imbalanced, the fraud pattern is changing, etc. Owing to the rarity of fraudulent activities, Fraud detection can be formulated as either a binary classification problem or One …
Indian Institute of Information Technology Allahabad（印度阿拉哈巴德信息技术学院）；Shiksha ‘O’ Anusandhan（悉克沙奥阿努桑德汉大学）
With healthcare being critical aspect, health insurance has become an important scheme in minimizing medical expenses. Following this, the healthcare industry has seen a significant increase in fraudulent activities owing to increased insurance, and fraud has become a significant contributor to rising medical care expenses, although its impact can be mitigated using fraud detection techniques. To detect fraud, machine learning techniques are used. The Centers for Medicaid and Medicare Services (CMS) of the United States federal government released "Medicare Part D" insurance claims is utilized…
Year-over-Year Developments in Financial Fraud Detection via Deep Learning: A Systematic Literature Review
Georgia Institute of Technology, College of Computing（佐治亚理工学院计算机学院）；Harvard University, School of Engineering and Applied Sciences（哈佛大学工程与应用科学学院）；University of Illinois Urbana-Champaign（伊利诺伊大学厄巴纳-香槟分校）；Columbia University, The Fu Foundation School of Engineering and Applied Science（哥伦比亚大学傅以文工程与应用科学学院）
Addressing Class Imbalance with Probabilistic Graphical Models and Variational Inference
University of Rochester（罗切斯特大学）；University of Minnesota（明尼苏达大学）；Northeastern University（东北大学）；University of California（加利福尼亚大学）；Cornell University（康奈尔大学）
Guaranteeing the security of transactional systems is a crucial priority of all institutions that process transactions, in order to protect their businesses against cyberattacks and fraudulent attempts. Adversarial attacks are novel techniques that, other than being proven to be effective to fool image classification models, can also be applied to tabular data. Adversarial attacks aim at producing adversarial examples, in other words, slightly modified inputs that induce the Artificial Intelligence (AI) system to return incorrect outputs that are advantageous for the attacker. In this paper we…
BMS Institute of Technology and Management（BMS理工与管理学院）；National Institute of Advanced Studies（国家高等研究院）；The University of Trans-Disciplinary Health Sciences And Technology（跨学科健康科学与技术大学）
Learning from limited and imbalanced data is a challenging problem in the Artificial Intelligence community. Real-time scenarios demand decision-making from rare events wherein the data are typically imbalanced. These situations commonly arise in medical applications, cybersecurity, catastrophic predictions etc. This motivates the development of learning algorithms capable of learning from imbalanced data. Human brain effortlessly learns from imbalanced data. Inspired by the chaotic neuronal firing in the human brain, a novel learning algorithm namely Neurochaos Learning (NL) was recently prop…
Introduction Data imbalance is one of the crucial issues in big data analysis with fewer labels. For example, in real-world healthcare data, spam detection labels, and financial fraud detection datasets. Many data balance methods were introduced to improve machine learning algorithms' performance. Research claims SMOTE and SMOTE-based data-augmentation (generate new data points) methods could improve algorithm performance. However, we found in many online tutorials, the valuation methods were applied based on synthesized datasets that introduced bias into the evaluation, and the performance go…
