Money Laundering Transaction with Machine Learning

Year : 2024 | Volume : 14 | Issue : 02 | Page : 1 15
    By

    R. Lingeswari,

  • S. Brindha,

  1. Research Scholar, Department of Computer Science, St. Peter’s Institute of Higher Education & Research, Chennai, Tamil Nadu, India
  2. Associate Professor, Department of Computer Applications, St. Peter’s Institute of Higher Education & Research, Chennai, Tamil Nadu, India

Abstract

This study discusses the use of machine learning algorithms to discover firms that are prone to money laundering. The purpose of this research is to develop, describe, and test a machine learning model for determining which bank transactions should be physically scrutinized for money laundering activities. To train a supervised machine learning model, three categories of historical data are required: legitimate “normal” transactions, transactions flagged as suspicious by the bank’s internal alert system, and instances of suspected money laundering reported to authorities. The model is trained to use various data sources, including background details of both the sender and receiver, past behaviors, and transaction records, to predict the likelihood that a new transaction warrants reporting. Our newly designed procedure outperforms the bank’s current methodology in terms of a fair assessment of performance. This research represents one of the scarce published anti-money laundering (AML) models for identifying suspicious transactions that has been tested on a dataset of realistic size. In addition, the paper provides a new performance indicator that was created particularly to compare the proposed solution against the bank’s existing anti-money laundering system. The greatest quality prediction results are obtained when a gradient boosting method is used instead of decision trees. The speed at which the optimal set might be produced was determined using the Hyperopt and Optuna Python package, and the quality of hyper parameter selection was studied. The model makes it possible to compile a list of the most crucial indicators for the early detection of money laundering and terrorist financing (ML/TF) organizations, and also provides appropriate suggestions for enhancing the compliance control process. Monetary laundering is a result of corruption, illegal activities, and organized crime, all of which have a social effect and have embroiled numerous groups, both directly and indirectly, in the laundering of illicit cash via a number of methods. This paper suggests employing a machine learning method to identify potentially suspicious activities among non-banking correspondents. A non-banking correspondent is a kind of financial agent that executes financial transactions on behalf of particular banking customers. Our results show that certain ways are more suited to this circumstance than others, and that these methodologies make it simpler to spot irregularities and suspicious transactions in this kind of financial intermediary.

Keywords: Anti-money laundering (AML), machine learning, terrorist financing, Non-bank correspondents, money laundering, transactions

[This article belongs to Current Trends in Information Technology ]

How to cite this article:
R. Lingeswari, S. Brindha. Money Laundering Transaction with Machine Learning. Current Trends in Information Technology. 2024; 14(02):1-15.
How to cite this URL:
R. Lingeswari, S. Brindha. Money Laundering Transaction with Machine Learning. Current Trends in Information Technology. 2024; 14(02):1-15. Available from: https://journals.stmjournals.com/ctit/article=2024/view=152848


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Regular Issue Subscription Review Article
Volume 14
Issue 02
Received 29/02/2024
Accepted 25/04/2024
Published 03/07/2024
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