Clustering based anomalous transaction reporting

Anti-money laundering (AML) refers to a set of financial and technological controls that aim to combat the entrance of dirty money into financial systems. A robust AML system must be able to automatically detect any unusual/anomalous financial transactions committed by a customer. The paper presents a hybrid anomaly detection approach that employs clustering to establish customers’ normal behaviors and uses statistical techniques to determine deviation of a particular transaction from the corresponding group behavior. The approach implements a variant of Euclidean Adaptive Resonance Theory, termed as TEART, to group customers in different clusters. The paper also suggests an anomaly index, named AICAF, for ranking transactions as anomalous. The approach has been tested on a real data set comprising of 8.2 million transactions and the results suggest that TEART scales well in terms of the partitions obtained when compared to the traditional K-means algorithm. The presented approach marks transactions having high AICAF values as suspicious