Machine learning based fraudulent detection system for financial transactions

Abstract

Maintaining the integrity of financial systems and preventing people and organizations from suffering financial losses depend heavily on the ability to spot fraudulent financial transactions. Traditional rule-based fraud detection methods have trouble identifying intricate patterns and developing fraud tactics. Machine learning approaches have become powerful fraud detection tools in recent years, utilizing the strength of data-driven models to spot fraudulent actions. The Existing rule-based fraud detection has difficulty in identifying complex patterns and evolving fraud tactics. This study thoroughly investigates the use of machine learning techniques, including decision trees and random forests, for financial transaction fraud detection, while also exploring feature engineering approaches to extract essential data from transaction records such as temporal, spatial, and relational features. In this study, real-world financial transaction datasets are used to conduct experimental evaluations, comparing the performance of various machine learning models based on accuracy, precision, recall, and F1- score. The results indicate that certain algorithms outperform others, demonstrating promising and favorable outcomes for CatBoost algorithm. This significance of our study lies in showcasing the effectiveness of machine learning techniques, compared to traditional rule-based methods, for detecting fraud in financial transactions, leading to more promising outcomes and contributing to the integrity and security of financial systems.

Topics & Concepts