Paper ID: 2112.07508

Anti-Money Laundering Alert Optimization Using Machine Learning with Graphs

Ahmad Naser Eddin, Jacopo Bono, David Aparício, David Polido, João Tiago Ascensão, Pedro Bizarro, Pedro Ribeiro

Money laundering is a global problem that concerns legitimizing proceeds from serious felonies (1.7-4 trillion euros annually) such as drug dealing, human trafficking, or corruption. The anti-money laundering systems deployed by financial institutions typically comprise rules aligned with regulatory frameworks. Human investigators review the alerts and report suspicious cases. Such systems suffer from high false-positive rates, undermining their effectiveness and resulting in high operational costs. We propose a machine learning triage model, which complements the rule-based system and learns to predict the risk of an alert accurately. Our model uses both entity-centric engineered features and attributes characterizing inter-entity relations in the form of graph-based features. We leverage time windows to construct the dynamic graph, optimizing for time and space efficiency. We validate our model on a real-world banking dataset and show how the triage model can reduce the number of false positives by 80% while detecting over 90% of true positives. In this way, our model can significantly improve anti-money laundering operations.

Submitted: Dec 14, 2021