A Money Laundering Structure Detection Method Based on Incremental Transaction Analysis

Money laundering is the process of legitimizing dirty money through complex transactions, posing a serious threat to a country’s financial stability and national security. Nowadays, with the prevalence of organized money laundering, launderers prefer to use intricate multi-hop laundering chains to transfer dirty money. Moreover, they engage in normal financial activities to disrupt detection by auditors. In response to these trends and challenges, we propose a novel unsupervised money laundering structure detection framework for the anti-money laundering field, called structure incremental expansion (SIE). Our framework consists of two main modules: 1) Initialization of suspicious structures, which adopts a control-limit based method to identify suspicious accounts exhibiting anomalous transaction behavior. These accounts will serve as the starting points for suspicious structure expansion. 2) Dynamic structure expansion, where we design three dynamic membership functions according to the Financial Action Task Force’s definitions of the three stages of money laundering evolution. Newly-added incremental transactions in the network will be assigned to appropriate expanding suspicious structures. We conduct extensive experiments on simulated and public financial networks. SIE exhibits desirable performance and scalability. We also provide a detailed case study, visualizing a complete money laundering structure detection process, demonstrating our method’s strong interpretability.