Detecting potential money laundering addresses in the Bitcoin blockchain using unsupervised machine learning

Money laundering is a serious problem worldwide, especially in the crypto market. This is mostly because of the anonymity that many cryptocurrencies offer. That is one of the reasons why cryptocurrencies are a haven for money laundering, because it is easier for criminal entities to buy the currency and then trade it for real fiat money. Detecting money laundering in cryptocurrency can be tricky because the crypto network is large and convoluted and nearly impossible to analyze by hand. What we can do is look at addresses that took part in transactions as actors and then use machine learning to predict what addresses are possibly laundering money. In this paper we intend to analyze methods that can be used to detect money laundering in Bitcoin using machine learning to empower investigators to more accurately and efficiently determine whether a suspicious activity is money laundering

Deep learning and explainable artificial intelligence techniques applied for detecting money laundering – a critical review

Money laundering has been a global issue for decades, which is one of the major threat for economy and society. Government, regulatory and financial institutions are combating it together in their respective capacity, however still billions of dollars in fines by authorities make the headlines in the news. High-speed internet services have enabled financial institutions to deliver better customer experience through multi-channel engagements, which has led to exponential growth in transactions and new avenues for laundering the money for fraudsters. Literature shows the usage of statistical methods, data mining and Machine Learning (ML) techniques for money laundering detection, but limited research on Deep Learning (DL) techniques, primarily due to lack of model interpretability and explainability of the decisions made. Several studies are conducted on application of ML for Anti-Money Laundering (AML), and Explainable Artificial Intelligence (XAI) techniques in general, but lacks the study on usage of DL techniques together with XAI. This paper aims to review the current state-of-the-art literature on DL together with XAI for identifying suspicious money laundering transactions and identify future research areas. Key findings of the review are, researchers have preferred variants of Convolutional Neural Networks, and AutoEncoder; graph deep learning together with natural language processing is emerging as an important technology for AML; XAI use is not seen in AML domain; 51% ML methods used in AML are non-interpretable, 58% studies used sample of old real data; key challenges for researchers are access to recent real transaction data and scarcity of labelled training data; and data being highly imbalanced. Future research directions are, application of XAI techniques to bring-out explainability, graph deep learning using natural language processing (NLP), unsupervised and reinforcement learning to handle lack of labelled data; and joint research programs between research community and industry to benefit from domain knowledge and controlled access to data

Mineração de dados como suporte à detecção de lavagem de dinheiro

Dissertação (mestrado) — Universidade de Brasília, Instituto de Ciências Exatas, Departamento de Ciência da Computação, 2016.Este trabalho apresenta o uso de técnicas de mineração de dados para detecção de empresas exportadoras brasileiras suspeitas de operarem exportações fictícias e conseqüente incorrência no crime de lavagem de dinheiro. A partir de estudos de aprendizagem de máquina com algoritmos supervisionados, foi desenvolvido um modelo capaz de classificar empresas suspeitas de operarem exportações fictícias. Em paralelo, foram desenvolvidos ainda estudos não supervisionados com Deep Learning Autoencoder e identificado um padrão de relacionamento entre os atributos numéricos representativos dos dados econômicos, mercantis, tributários e sociais das empresas que permitem a identificação de anomalias em dados de outras empresas. As empresas identificadas a partir do modelo supervisionado proposto neste trabalho foram submetidas à área específica de fiscalização aduaneira dentro da RFB e julgadas aptas a integrarem a programação de seleção para fiscalizações no ano de 2017. A metodologia desenvolvida, seus resultados e sua aplicabilidade foram divulgadas a todos escritórios de pesquisa e investigação da RFB por meio de Informação de Pesquisa e Investigação (IPEI). Um estudo de caso apresentando a metodologia aqui desenvolvida está previsto para ocorrer no 1o Encontro Nacional da RedeLab de 2017. Melhorias futuras a este trabalho incluem a detecção de anomalias e classificação de suspeição na exportação com maior granularidade dos dados, permitindo a sua identificação independente da empresa: por exemplo, a partir de transações, por rotas de produtos ou por tipo de mercadoria.This research presents the use of data mining techniques to detect brazilian exporting companies suspected of operating dummy exports and consequently incurring the crime of money laundering. Based on studies involving supervised analyzes, a model was developed capable of classifying companies suspected of operating dummy exports. Based on studies with Deep Learning Autoencoder, a pattern of relationship was identified between the numerical attributes representative of the economic and tax data of the companies. From this pattern, is possible to identify anomalies in data of another companies. The companies identified in this study were submitted to the specific area of customs supervision and found fit to integrate the selection schedule for inspections in the year 2017. The technique developed was disclosed to all investigation offices of the RFB through a document called IPEI. A case study presenting the methodology developed is expected to take place at the first national meeting of RedeLab 2017. Future improvements to this work include detection of anomalies and classification of export suspicious with greater granularity of the data, allowing them to be identified independently of the company: for example from transactions, product routes and by commodity type

Applying Supervised Machine Learning Algorithms for Fraud Detection in Anti-Money Laundering

As international money transfers become more automated, it becomes easier for criminals to transfer money across borders in a fraction of a second, while it also becomes easier for regulators to inspect and monitor international money mobility and identify unusual patterns of money movement. Machine learning algorithms may be a useful addition to the current money laundering detection issues. This research empirically tested four machine learning algorithms (Logistic regression, SVM, Random Forest, and ANN) using a synthetic dataset that closely matches regular transaction behavior. After observing the performance of different algorithms, it can be stated that the Random Forest technique, when compared to the other techniques, provides the best accuracy. The least accurate approach was the Artificial Neural Network (ANN)

Towards Optimal Free Trade Agreement Utilization through Deep Learning Techniques

In recent years, deep learning based methods achieved new state of the art in various domains such as image recognition, speech recognition and natural language processing. However, in the context of tax and customs, the amount of existing applications of artificial intelligence and more specifically deep learning is limited. In this paper, we investigate the potentials of deep learning techniques to improve the Free Trade Agreement (FTA) utilization of trade transactions. We show that supervised learning models can be trained to decide on the basis of transaction characteristics such as import country, export country, product type, etc. whether FTA can be utilized. We apply a specific architecture with multiple embeddings to efficiently capture the dynamics of tabular data. The experiments were evaluated on real-world data generated by Enterprise Resource Planning (ERP) systems of an international chemical and consumer goods company

Opinion Detection of Public Sector Financial Statements Using K-Nearest Neighbors

The identification of ethical violations committedby the auditor is very difficult to do. Artificial intelligence offersanomaly detection as an alternative method for detecting theopinion anomaly which can be an early indicator of the opiniontrading occurrence. This paper proposes the use of originalfeatures from public sector rather than the use of modifiedfeatures from the private sector to be applied in opinion detectionin public sector. By using 60% Holdout validation, 1-NNclassification showed that original featured from the public sectoroutperformed the modified featured from the private sector by5.82% through 13.10% under F-Measure Criterion and by4.22% through 9.56% under AUC criterion

Privacy-preserving data mining of cross-border financial flows

Criminal networks continue to utilize the global financial system to launder their proceeds of crime, despite the broad enactment of anti-money laundering (aml) laws and regulations in many countries. Money laundering consumes capital resources and the tax revenue needed to fund infrastructure development and alleviate poverty in developing market economies. This paper, therefore, expands on the tools available for enabling privacy-preserving data mining in multidimensional datasets to combat cross-border money laundering. Most importantly, this paper develops a novel measure for detecting anomalies in cross-border financial networks, allowing financial institutions and regulatory organizations to identify suspicious nodes. The research used a sample dataset comprising international financial transactions and a hypothetical dataset to demonstrate the measure of node importance and the symmetric-key encryption algorithm. The results support the argument that the proposed network measure can detect node anomalies in the cross-border financial flows network, enabling regulatory authorities and law enforcement agencies to investigate financial transactions for suspicious activity and criminal conduct. The encryption algorithm can ensure adherence to information privacy laws and policies without compromising data reusability. Hence, the proposed methodology can improve the proactive management of money laundering risks associated with cross-border fund flows for the global financial system’s benefit.Banking Sector Education and Training Authority Bankseta.http://www.tandfonline.com/loi/oaen20dm2022Industrial and Systems Engineerin